Title 6.2 - Financial Institutions and Services

Subtitle I - GENERAL PROVISIONS

Chapter 1 - DEFINITIONS AND GENERAL PROVISIONS

Article 1 - DEFINITIONS

§ 6.2-100. Definitions.

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

"Bureau" means the Bureau of Financial Institutions, a division of the Commission.

"Commission" means the State Corporation Commission.

"Commissioner" means the Commissioner of Financial Institutions.

"Commission's Rules" means the rules of practice and procedure prescribed by the Commission pursuant to § 12.1-25.

"Entity" means any corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or other legal or commercial entity.

"Finance charge" has the meaning assigned to it in Consumer Financial Protection Bureau Regulation Z, 12 C.F.R. § 1026.4, as amended.

"Financial institution" means any bank, trust company, savings institution, industrial loan association, consumer finance company, or credit union.

"Person" means any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or other legal or commercial entity.

Code 1950, § 6-1; 1966, c. 584, § 6.1-1; 1970, c. 270, § 6.1-2.1; 1976, c. 658; 1978, c. 683; 1983, c. 491; 1996, c. 16; 2010, c. 794; 2016, c. 501.

Article 2 - General Provisions

§ 6.2-101. Confidentiality of information.

A. Except as otherwise provided in this title or § 12.1-19, the following shall not be disclosed by the Commission or any of its employees: (i) a report of examination of any person subject to this title, including any contents thereof; (ii) any information furnished to or obtained by the Bureau, the disclosure of which, in the opinion of the Commissioner, could endanger the safety and soundness of a bank, savings institution, or credit union; or (iii) any personal financial information furnished to, or obtained by the Bureau.

B. Any reports and information described in subsection A may be provided to:

1. Members and employees of the Commission in the performance of their duties;

2. In the case of an entity, directors and officers thereof and such other persons as may be authorized by resolution of the entity's board of directors;

3. Such governmental officers, instrumentalities, or agencies as the Commissioner may determine, in his discretion, to be proper recipients of such reports or information;

4. Any persons pursuant to lawful process and, if necessary to protect the confidentiality of the reports and information, an appropriate protective order issued by or under the authority of any appropriate court;

5. Other persons pursuant to grand jury subpoenas; or

6. Any other persons with the consent of the person to whom the report or information pertains.

1988, c. 555, § 6.1-1.1; 1991, c. 127; 2004, c. 165; 2010, c. 794.

§ 6.2-101.1. Certified mail; subsequent mail or notices may be sent by regular mail.

Whenever in this title the Commission is required to send any mail or notice by certified mail and such mail or notice is sent certified mail, return receipt requested, then any subsequent, identical mail or notice that is sent by the Commission may be sent by regular mail.

2011, c. 566.

§ 6.2-102. Use of funds collected under this title.

A. All fees assessed under any provision of this title and paid into the state treasury shall be deposited to a special fund designated "Financial Institutions Special Fund -- State Corporation Commission," and out of such special fund and the unexpended balance thereof shall be appropriated the sums necessary for the regulation, supervision, and examination of all entities subject to regulation under this title. The Commission shall have the authority to maintain a reasonable margin in the nature of a reserve in the Financial Institutions Special Fund for the expenses of operating the Bureau.

B. In order to provide additional funds for the operation of the Bureau, the Commission is authorized to increase the fees and assessments for the examination and supervision of banks, trust companies, savings institutions, industrial loan associations, credit unions, consumer finance licensees, mortgage lenders, and mortgage brokers by an amount not to exceed 50 percent of the fees and assessments provided for in §§ 6.2-908, 6.2-1033, 6.2-1202, 6.2-1310, 6.2-1414, 6.2-1532, and 6.2-1612.

Code 1950, § 6-4; 1966, c. 584, § 6.1-2; 1974, c. 183; 1987, cc. 556, 558; 1988, c. 303; 1993, cc. 419, 432; 1994, c. 312; 2010, c. 794.

§ 6.2-103. Financial institutions to furnish certain information to fiduciaries.

The provisions of this title and any other provisions of law notwithstanding, any financial institution subject to the provisions of this title shall make available to any fiduciary, upon request, all information concerning assets or liabilities in which his decedent or ward had or has any interest.

1970, c. 270, § 6.1-2.1; 1976, c. 658; 1978, c. 683; 1983, c. 491; 1996, c. 16; 2010, c. 794.

§ 6.2-103.1. Financial institutions to furnish certain information as part of adult protective services investigation.

Notwithstanding any other provision of law, any financial institution subject to the provisions of this title shall cooperate in any investigation of alleged adult abuse, neglect, or exploitation conducted by a local department of social services pursuant to Chapter 16 (§ 63.2-1600 et seq.) of Title 63.2 and shall make any financial records or information relevant to such investigation available to the local department and to any court-appointed guardian ad litem for the adult who is the subject of such adult protective services investigation upon request to the extent allowed under the Gramm-Leach-Bliley Act (15 U.S.C. § 6801 et seq.) and 12 U.S.C. § 3403. Absent gross negligence or willful misconduct, any financial institution and its staff shall be immune from civil or criminal liability for providing information or records to the local department of social services or to a court-appointed guardian ad litem pursuant to this section.

2022, c. 743; 2023, cc. 260, 261.

§ 6.2-104. Directors to serve only one institution.

A. No officer or director of any financial institution, other than a consumer finance company or credit union domiciled in the Commonwealth, shall at the same time serve as an officer or director of any other financial institution unless both such institutions are within a single financial institution holding company.

B. Notwithstanding the provisions of subsection A, the Commission, upon petition brought on behalf of an individual, may permit him to serve on the boards of more than one such institution if the Commission finds that the financial institutions are not in competition with each other or that one or both of the institutions might otherwise be denied capable management or direction from an individual residing in or employed in the locality served by an institution.

1978, c. 683, § 6.1-2.7; 1979, c. 376; 1987, c. 556; 1989, c. 162; 2010, c. 794.

§ 6.2-105. Reclassification or conversion of banking institution shares.

A. As used in this section, unless the context requires otherwise:

"Banking institution" means a corporation that is organized under the Virginia Stock Corporation Act (§ 13.1-601 et seq.) and that is a (i) bank, (ii) savings institution, (iii) bank holding company as defined in 12 U.S.C. § 1841 or § 6.2-800, (iv) savings and loan holding company, or (v) multiple or diversified savings and loan holding company as defined in 12 U.S.C. § 1467a.

"Issuer" means a banking institution required to file periodic reports under § 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. § 78m or 78o(d)).

B. A banking institution may adopt an amendment to its articles of incorporation to reclassify or convert a portion of its issued and outstanding shares of common stock into a class or series of preferred stock for the purpose of ceasing to be, or avoiding the status of, an issuer, provided (i) such reclassification or conversion is authorized by the banking institution's original or amended articles of incorporation and (ii) the reclassified or converted shares continue to be a part of the equity capital of the corporation.

C. A reclassification or conversion of shares pursuant to this section shall not be subject to the provisions of Article 15 (§ 13.1-729 et seq.) of the Virginia Stock Corporation Act, notwithstanding that such shares are being reclassified or converted and other shares of the same class or series are not being reclassified or converted, if:

1. The board of directors of the banking institution has recommended to the shareholders approval of the amendment to reclassify or convert such shares;

2. The shareholders of the corporation approve the amendment;

3. All affected shares are reclassified or converted on the same terms; and

4. Articles of amendment are filed in accordance with § 13.1-710.

2009, cc. 253, 356, § 6.1-2.7:1; 2010, c. 794.

§ 6.2-106. Payment of civil penalties.

Civil penalties paid pursuant to this title, when collected, shall be paid by the Commission into the treasury of Virginia, in the manner provided for judgments collected as set forth in § 12.1-35.

2010, c. 794.

§ 6.2-107. Effect of contract provision requiring amendment or waiver to be in writing.

If any written contract to which a financial institution is a party contains a provision to the effect that no amendment or waiver of any terms or provisions thereof shall be valid unless such amendment or waiver is in writing, then any amendment or waiver of any terms or provisions of that contract by conduct, course of practice or dealing, or otherwise shall not apply to future rights and obligations under that contract unless it is in writing.

2013, cc. 67, 142.

Chapter 2 - MONEY AND CURRENCY

Article 1 - MONEY OF ACCOUNT

§ 6.2-200. Money of account.

A. The money of account of the Commonwealth shall be the dollar, cent, and mill. All accounts by public officers shall be kept in accordance with such monetary units.

B. No writing shall be invalid, nor shall the force of any account or entry be impaired, because a sum of money is expressed in other monetary units.

1987, c. 622, § 6.1-330.50; 2010, c. 794.

§ 6.2-201. Ascertaining value in money of account for money expressed in foreign currency.

A. In any suit for a sum of money expressed in any foreign currency or otherwise than in the money of account of the Commonwealth, the jury or the court shall ascertain the value in the money of account of the sum so expressed, including an appropriate allowance for the difference of exchange. The judgment or order may be for either the amount so ascertained, or for the amount of money so expressed, and the judgment or order shall be discharged by an amount so ascertained.

B. In any such suit involving an instrument to which § 8.3A-107 is applicable, the provisions of that section shall apply.

1987, c. 622, § 6.1-330.51; 2010, c. 794.

Article 2 - CURRENCY ISSUANCE AND CIRCULATION

§ 6.2-202. Issuance of currency and related prohibited acts.

A. No individual or entity, unless authorized by law, shall:

1. Issue any note, bill, scrip, or other paper or thing with intent that the same be circulated as currency; or

2. Otherwise deal, trade, or carry on business as a bank of circulation.

B. All contracts made for forming any entity to engage in any activity prohibited by subsection A shall be void.

1987, c. 622, § 6.1-330.52; 2010, c. 794.

§ 6.2-203. Contracts and securities from illegal currency dealing void; recovery of payments.

A. All contracts and securities that originate from, or are made or obtained in whole or in part by means of any illegal currency dealing, trade, or business, shall be void.

B. If any person pays any money or other valuable consideration on account of any contract or security originating from, or made or obtained in whole or in part by means of, any illegal currency dealing, trade, or business, such person or his representative or assignee may recover the amount or value of such payment from the person to whom, or to whose use, the payment was made, by bringing suit within one year after such payment.

1987, c. 622, § 6.1-330.52; 2010, c. 794.

§ 6.2-204. Capital stock of certain entities vested in Commonwealth; proceedings to recover stock; liability.

A. The capital stock of every entity formed to engage in any activity prohibited by subsection A of § 6.2-202, whether paid up or merely subscribed, shall belong to the Commonwealth. The Attorney General, whenever informed of the existence of any such entity, shall institute a suit in the Circuit Court of the City of Richmond, for the purpose of recovering such capital stock. In such suit, all or any of the members of such entity, and any of its officers, agents, or managers, may be made defendants, and compelled to exhibit all their books and papers, and an account of everything necessary to enable the court to enter a proper order.

B. No disclosure made by a defendant in such suit, and no book or paper exhibited by him in answer to the bill, or under the order of the court, shall be used as evidence against him in any case at law.

C. Every member of any entity formed to engage in any activity prohibited by subsection A of § 6.2-202 who is made defendant in any such suit, shall be held liable to the Commonwealth for his proportion of the capital stock in such entity held by him, or for his use or benefit, at the institution of such suit, or at the time of the order. Such order against any defendant shall be a bar to a proceeding against him for any act done in violation of subsection A of § 6.2-202.

1987, c. 622, § 6.1-330.52; 2010, c. 794.

Chapter 3 - INTEREST AND USURY

Article 1 - DEFINITIONS

§ 6.2-300. Definitions.

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

"Bank" means any national bank, any bank organized under Chapter 8 (§ 6.2-800 et seq.), or any bank incorporated and organized under the laws of another state.

"Credit union" means any credit union organized under Chapter 13 (§ 6.2-1300 et seq.) or any credit union incorporated and organized under the laws of another state. "Credit union" shall not include any federal credit union.

"First deed of trust" or "first mortgage" includes all deeds of trust and mortgages, and amendments thereto, that are made by the same grantor or mortgagor, secure notes held by the same holder, convey substantially the same real estate, and are superior to all other deeds of trust or mortgages on the real estate.

"Grantor" or "mortgagor" includes an owner of real estate, and spouse, who has assumed responsibility for the obligation secured by a mortgage or deed of trust encumbering the real estate.

"Loan" means a loan or forbearance of money.

"Open-end credit" or "open-end credit plan" means consumer credit extended by a creditor under a plan in which: (i) the creditor reasonably contemplates repeated transactions; (ii) the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (iii) the amount of credit that may be extended to the consumer during the term of the plan, up to any limit set by the creditor, is generally made available to the extent that any outstanding balance is repaid.

"Savings institution" means any savings institution, as defined in § 6.2-1100, incorporated and organized under the laws of the United States, the Commonwealth, or another state.

"Subordinate mortgage or deed of trust" means a mortgage or deed of trust that is subject to a prior mortgage or deed of trust in existence at the time of the making of the loan secured by such subordinate mortgage or deed of trust.

1987, c. 622, §§ 6.1-330.49, 6.1-330.69, 6.1-330.71; 1991, c. 157; 1996, c. 243; 2010, c. 794.

Article 2 - LEGAL, JUDGMENT, AND CONTRACT RATES OF INTEREST

§ 6.2-301. Legal rate of interest; when legal rate implied.

A. The legal rate of interest shall be an annual rate of six percent.

B. Except as provided in subsection (b) of § 8.3A-112 and § 6.2-302, the legal rate of interest shall be implied when there is an obligation to pay interest and no express contract to pay interest at a specified rate.

C. The seller or provider of goods sold or services provided on an open account shall be entitled to, and may collect, interest at the legal rate upon the unpaid balance if (i) there exists no written agreement for closed-end credit under § 6.2-311 or open-end credit plan under § 6.2-312 and (ii) the purchaser or recipient of the goods or services fails to make payment in full within 60 days after mailing or presentation of a billing statement or invoice. Such interest shall begin to accrue on the day following such 60-day period.

1987, c. 622, § 6.1-330.53; 1991, c. 375, § 6.1-330.77:1; 2004, c. 646; 2010, c. 794.

§ 6.2-302. Judgment rate of interest.

A. The judgment rate of interest shall be an annual rate of six percent, except that a money judgment entered in an action arising from a contract shall carry interest at the rate lawfully charged on such contract, or at six percent annually, whichever is higher.

B. If the contract or other instrument does not fix an interest rate, the court shall apply the judgment rate of six percent to calculate prejudgment interest pursuant to § 8.01-382 and to calculate post-judgment interest.

C. The rate of interest for a judgment shall be the judgment rate of interest in effect at the time of entry of the judgment on any amounts for which judgment is entered and shall not be affected by any subsequent changes to the rate of interest stated in this section.

1987, cc. 622, 623, 630, § 6.1-330.54; 1991, c. 508; 2004, c. 646; 2005, c. 455; 2010, cc. 550, 794.

§ 6.2-303. Contracts for more than legal rate of interest.

A. Except as otherwise permitted by law, no contract shall be made for the payment of interest on a loan at a rate that exceeds 12 percent per year.

B. Laws that permit payment of interest at a rate that exceeds 12 percent per year are set out, without limitation, in:

1. Article 4 (§ 6.2-309 et seq.) of this chapter;

2. Chapter 15 (§ 6.2-1500 et seq.), relating to powers of consumer finance companies;

3. Chapter 18 (§ 6.2-1800 et seq.), relating to short-term loans;

4. Chapter 22 (§ 6.2-2200 et seq.), relating to interest chargeable by motor vehicle title lenders;

5. § 36-55.31, relating to loans by the Virginia Housing Development Authority;

6. § 38.2-1806, relating to interest chargeable by insurance agents;

7. Chapter 47 (§ 38.2-4700 et seq.) of Title 38.2, relating to interest chargeable by premium finance companies;

8. § 54.1-4008, relating to interest chargeable by pawnbrokers; and

9. § 58.1-3018, relating to interest and origination fees payable under third-party tax payment agreements.

C. In the case of any loan upon which a person is not permitted to plead usury, interest and other charges may be imposed and collected as agreed by the parties.

D. Any provision of this chapter that provides that a loan or extension of credit may be enforced as agreed in the contract of indebtedness, shall not be construed to preclude the charging or collecting of other loan fees and charges permitted by law, in addition to the stated interest rate. Such other loan fees and charges need not be included in the rate of interest stated in the contract of indebtedness.

E. The provisions of subsection A shall apply to any person who seeks to evade its application by any device, subterfuge, or pretense whatsoever, including:

1. The loan, forbearance, use, or sale of (i) credit, as guarantor, surety, endorser, comaker, or otherwise; (ii) money; (iii) goods; or (iv) things in action;

2. The use of collateral or related sales or purchases of goods or services, or agreements to sell or purchase, whether real or pretended; receiving or charging compensation for goods or services, whether or not sold, delivered, or provided; and

3. The real or pretended negotiation, arrangement, or procurement of a loan through any use or activity of a third person, whether real or fictitious.

F. Any contract made in violation of this section is void and no person shall have the right to collect, receive, or retain any principal, interest, fees, or other charges in connection with the contract.

1987, c. 622, § 6.1-330.55; 1997, c. 180; 2002, c. 897; 2010, cc. 477, 794; 2020, cc. 1215, 1258.

Article 3 - USURY

§ 6.2-304. Plea of usury; judgment.

Any borrower may plead in general terms that the contract on which the action is brought was for the payment of interest greater than is allowed by statute. If the court determines that the contract is usurious, judgment shall be rendered only for the principal sum.

1987, c. 622, § 6.1-330.56; 2010, c. 794.

§ 6.2-305. Recovery of twice total usurious interest paid; limitation of action; injunction to prevent sale of property pending action; effect of errors in computation.

A. If interest in excess of that permitted by an applicable statute is paid upon any loan, the person paying may bring an action within two years from the first to occur of: (i) the date of the last scheduled loan payment or (ii) the date of payment of the loan in full, to recover from the person taking or receiving such payments:

1. The total amount of the interest paid to such person in excess of that permitted by the applicable statute;

2. Twice the total amount of interest paid to such person during the two years immediately preceding the date of the filing of the action; and

3. Court costs and reasonable attorney fees.

B. If the sale of property in which an interest has been conveyed to secure the payment of the debt is scheduled or anticipated, an injunction may be granted to prevent such sale pending the completion of an action brought pursuant to subsection A.

C. Any creditor who proves that interest or other charges in excess of those permitted by law were imposed or collected as a result of a bona fide error in computation or similar mistake shall not be liable for the penalties prescribed in this section. In such event, the creditor shall only be liable to return to the borrower the amount of interest or other charges collected in excess of the amount permitted by applicable statute.

1987, c. 622, § 6.1-330.57; 2010, c. 794.

§ 6.2-306. Waiver of rights violative of public policy.

A. Any agreement or contract in which the borrower waives the benefits of this chapter or releases any rights he may have acquired under this chapter shall be deemed to be against public policy and void.

B. The provisions of subsection A shall not apply to a waiver of benefits or release of rights made subsequent to a loan as part of a settlement of potential or pending claims by a borrower involving such loan.

1987, c. 622, § 6.1-330.58; 2010, c. 794.

§ 6.2-307. Assertion of defenses or claims by borrowers; effect of assignment.

As to any loan to which the provisions of §§ 6.2-327 and 6.2-328 are applicable, the borrower may assert any defense or claim he may have under §§ 6.2-304 and 6.2-305 against any assignee or transferee of the contract of indebtedness.

1987, c. 622, § 6.1-330.59; 2010, c. 794.

§ 6.2-308. Entities not permitted to plead usury.

A. No (i) corporation, (ii) partnership that is required to file a certificate pursuant to Chapter 2.1 (§ 50-73.1 et seq.) of Title 50 or was required to file a certificate pursuant to former Chapter 2 (§ 50-44 et seq.) or Chapter 3 (§ 50-74 et seq.) of Title 50 or that is formed under laws other than those of the Commonwealth, (iii) limited liability company, (iv) business trust, or (v) joint venture organized for the purpose of holding, developing, and managing real estate for profit, shall, by way of defense or otherwise, avail itself of any of the provisions of this chapter or any other statutory or case law relating to usury or compounding of interest to avoid or defeat the payment of any interest or any other sum that it has contracted to pay.

B. Nothing contained in this chapter or any other statutory or case law relating to usury or compounding of interest shall be construed to prevent the recovery of interest or any other sum that an entity described in subsection A has contracted to pay, regardless of whether it is more than the contract rate of interest and the fact appears on the face of the contract.

1987, c. 622, § 6.1-330.76; 1988, c. 765; 1993, c. 113; 2010, c. 794.

Article 4 - LOANS EXEMPT FROM LIMIT ON CONTRACT RATE OF INTEREST

§ 6.2-309. Charges by banks and savings institutions on installment loans.

Notwithstanding any statutory or case law, a bank or savings institution making a loan payable in installments may impose finance charges and other charges and fees at such rates and in such amounts and manner as the borrower has agreed.

1987, c. 622, § 6.1-330.60; 1996, c. 242; 1997, c. 128; 1999, c. 610; 2001, c. 743; 2010, c. 794.

§ 6.2-310. Rate of interest chargeable by state banks and savings institutions.

In addition to the permissible interest rates and charges specifically granted to banks and savings institutions by this title, state banks and savings institutions may take, receive, reserve, and charge on any loan, any rate of interest, finance charge, or other loan charge permitted to any other lender under the laws of the Commonwealth, other than those rates or charges permitted to consumer finance companies under § 6.2-1520.

1980, c. 336, § 6.1-5.3; 1981, c. 93, § 6.1-195.3:1; 1985, c. 425, § 6.1-194.6; 1987, c. 556; 1988, c. 2; 2010, c. 794.

§ 6.2-311. Closed-end installment loans by sellers of goods or services.

A. Any seller of goods or services who extends credit under a closed-end installment credit plan or arrangement may impose finance charges at such rate or rates as the seller and the purchaser have agreed. Deferrals and extensions of the time for payment, if allowed by a seller of goods or services who extends credit under a closed-end installment credit plan or his assignee, may be subject to a finance charge if agreed to in the original contract or at the time of the renewal or extension. No additional finance charge shall be made for the extension of credit under such a plan or arrangement. If the total finance charge on the transaction is precomputed according to the actuarial method, the finance charge shall be calculated on the assumption that all scheduled payments will be made when due. The balance on which such finance charge may be imposed may include the deferred portion of the sales price, costs and charges incidental to the transaction, including (i) any insurance premium financed in connection therewith and (ii) the amount actually paid or to be paid by the seller to discharge a security interest or lien on the property traded in. The payment by a lessor to discharge a security interest or lien on the property traded in may be included in the gross capitalized cost of the goods leased and, for purposes of this chapter and Chapter 6 (§ 55.1-600 et seq.) of Title 55.1, shall not constitute a loan.

B. The debtor shall have the right to prepay in full on precomputed transactions and receive a rebate of unearned finance charge determined in accordance with the Rule of 78, as illustrated in § 6.2-403, or other method elected by the seller under which the finance charge imposed does not exceed the amount that results from application of the Rule of 78 on extensions of credit with an initial maturity of 61 months or less. On extensions of credit with an initial maturity of more than 61 months, the debtor shall receive a rebate computed under a method at least as favorable to the debtor as the actuarial method. The seller may also condition such rebate upon receiving a minimum of $25 in finance charges. This amount, to the extent not earned, may be withheld from the rebate required hereunder.

C. In connection with such a credit plan, the seller may also:

1. Impose a late charge pursuant to § 6.2-400; and

2. Charge and collect a document fee as may be agreed upon by the seller and purchaser in connection with such credit plan. The document fee shall (i) be for the preparation, handling, and processing of documents relating to the goods or services and to the closing of the transaction and (ii) not be considered a finance charge for the purposes of this chapter.

D. Premiums for credit life insurance and credit accident and health insurance purchased by the debtor shall not be construed as an additional charge for the extension of credit if such insurance coverage is purchased voluntarily by the debtor. Premiums for property insurance on the goods purchased or leased, including vendor's single interest insurance on such goods, shall not be construed as additional charges for the extension of credit if a clear and conspicuous statement in writing is furnished by the seller or lessor to the buyer or lessee setting forth the cost of the insurance if obtained from or through the seller or lessor and stating that the buyer or lessee may choose the person through which the insurance is to be obtained.

1987, c. 622, § 6.1-330.77; 1988, c. 145; 1990, c. 338; 1999, cc. 62, 373; 2010, c. 794.

§ 6.2-312. Open-end credit plans.

A. The provisions of this section shall apply to any person that makes, arranges, or negotiates a loan or otherwise extends credit under an open-end credit plan, whether or not the person maintains a physical presence in the Commonwealth. However, the provisions of this section shall not apply to any bank, savings institution, or credit union as such terms are defined in § 6.2-300.

B. Notwithstanding any provision of this chapter other than § 6.2-327, and except as provided in subsections D, E, and F, a seller or lender engaged in extending credit under an open-end credit plan may impose, on credit extended under the plan, finance charges and other charges and fees at such rates and in such amounts and manner as may be agreed upon by the creditor and the obligor, if under the plan a finance charge is imposed upon the obligor if payment in full of the unpaid balance is not received at the place designated by the creditor prior to the next billing date, which shall be at least 25 days later than the prior billing date.

C. Notwithstanding the provisions of § 6.2-327 and subject to the provisions of § 8.9A-204.1, any loan made under this section may be secured in whole or in part by a subordinate mortgage or deed of trust on residential real estate improved by the construction thereon of housing consisting of one- to four-family dwelling units.

D. The following persons are prohibited from engaging in the extension of credit under an open-end credit plan described in this section: (i) any person licensed under Chapter 18 (§ 6.2-1800 et seq.), any person affiliated through common ownership with such licensed person, and any person that is a subsidiary of such licensed person; (ii) any person licensed under Chapter 22 (§ 6.2-2200 et seq.), any person affiliated through common ownership with such licensed person, and any person that is a subsidiary of such licensed person; and (iii) any person conducting business at any office, suite, room, or place of business where a person described in clause (i) or (ii) is conducting business.

E. No person shall make a loan or otherwise extend credit under an open-end credit plan or any other lending arrangement that is secured by a non-purchase money security interest in a motor vehicle, as such term is defined in § 6.2-2200, unless such loan or extension of credit is made in accordance with, or is exempt from, the provisions of Chapter 22 (§ 6.2-2200 et seq.).

F. A seller or lender engaged in extending credit under an open-end credit plan to a resident of the Commonwealth or to any individual in the Commonwealth shall not charge, collect, or receive, directly or indirectly, credit insurance premiums, charges for any ancillary product sold, charges for negotiating forms of loan proceeds or refunds other than cash, charges for brokering or obtaining an extension of credit, or any fees, interest, or charges in connection with credit extended under the plan, other than (i) interest at a simple annual rate not to exceed 36 percent and (ii) a participation fee not to exceed $50 per year. Any extension of credit made in violation of this subsection is void and no person shall have the right to collect, receive, or retain any principal, interest, fees, or other charges in connection with the extension of credit.

G. Any violation of the provisions of this section shall constitute a prohibited practice in accordance with § 59.1-200 and shall be subject to any and all of the enforcement provisions of the Virginia Consumer Protection Act (§ 59.1-196 et seq.).

H. A third party shall not engage in the extension of credit under an open-end credit plan described in this section.

1987, cc. 622, 639, 714, § 6.1-330.78; 1992, Sp. Sess., c. 4; 1997, c. 112; 2009, cc. 784, 860; 2010, cc. 477, 794; 2020, cc. 1215, 1258.

§ 6.2-313. Open-end credit extended by banks or savings institutions.

A. Notwithstanding any statutory or case law, any bank or savings institution may impose finance charges and other charges and fees at such rates and in such amounts and manner as may be agreed by the borrower under an open-end credit plan.

B. In the event of the extension of credit by a bank or savings institution hereunder to be effected by the use of a credit card for the purchase of merchandise or services, no finance charge shall be imposed upon the cardholder or borrower on such extension of credit if payment in full of the unpaid balance owing for all extensions of credit under the open-end credit plan is received at the place designated by the creditor prior to the payment due date, which shall be at least 25 days later than the billing date.

1987, cc. 622, 639, 714, § 6.1-330.63; 1992, Sp. Sess., c. 4; 1997, c. 112; 2005, c. 670; 2010, c. 794; 2015, cc. 453, 454.

§ 6.2-314. Motor vehicle purchase loans by subsidiaries and affiliates of banks and savings institutions.

Notwithstanding any statutory or case law, a subsidiary or affiliate of a bank or savings institution that is not a licensee under the provisions of Chapter 15 (§ 6.2-1500 et seq.) may impose finance charges and other charges and fees at such rates and in such amounts and manner as the borrower has agreed on loans payable in installments for the purpose of financing the purchase of a motor vehicle.

1987, c. 622, § 6.1-330.60; 1996, c. 242; 1997, c. 128; 1999, c. 610; 2001, c. 743; 2010, c. 794.

§ 6.2-315. Loans by certain financial institutions or brokers payable on demand or having a term up to one year.

Any bank, savings institution, broker duly licensed to transact business as a stockbroker, or broker-dealer registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission, may loan money or discount bonds, bills, notes or other paper, whether payable on demand or for periods up to one year. Such a loan or discounting may be lawfully enforced as agreed in the contract of indebtedness. An interest rate charged in advance upon the entire amount of the loan or discount shall be lawful.

1987, c. 622, § 6.1-330.62; 2010, c. 794.

§ 6.2-316. Loans of $5,000 or more made by certain financial institutions.

No person shall, by way of defense or otherwise, avail himself of the provisions of this chapter or any other section relating to usury to avoid or defeat the payment of interest, or any other sum, upon a loan made to a person by a bank, savings institution, industrial loan association, or credit union, if the initial principal amount of the loan is $5,000 or more.

1987, c. 622, § 6.1-330.61; 2010, c. 794.

§ 6.2-317. Loans of $5,000 or more for business or investment purposes.

A. For purposes of this section:

1. A loan shall be deemed to be for business or investment purposes if it is not for personal, family, or household purposes; and

2. Personal, family, or household purposes do not include a passive or active investment.

B. No person shall, by way of defense or otherwise, avail himself of the provisions of this chapter, or any other statutory or case law relating to usury or compounding of interest, to avoid or defeat the payment of interest, or any other sum, in connection with a loan made to a person for business or investment purposes, if the initial amount of the loan is $5,000 or more.

1987, c. 622, § 6.1-330.75; 2010, c. 794.

§ 6.2-318. Loans by credit unions.

A. As used in this section, "average daily balance" means, for any billing period, that amount which is the sum of the actual amounts outstanding each day during the billing period divided by the number of days in the billing period.

B. Notwithstanding any other statute or provision relating to interest or usury, any credit union may charge interest as agreed by the borrower provided such interest is not charged in advance.

C. Any open-end credit plan offered by a credit union shall provide:

1. For computation of any finance charges by application of a rate, at the option of the credit union, to:

a. The average daily balance for the period ending on the billing date;

b. The balance existing on the billing date of the month; or

c. Any other balance which does not result in the credit union charging or receiving any sum in excess of what would be charged or received under subdivision a or b;

2. That no finance charge shall be imposed unless the bill is mailed not later than eight days, excluding Saturdays, Sundays and holidays, after the billing date, except that such time limitation shall not apply in any case where the credit union has been prevented, delayed, or hindered in mailing or delivering the bill within such time period because of an act of God, war, civil disorder, natural disaster, strike, or other excusable or justifiable cause; and

3. That in the event of the extension of open-end credit by a credit union to be effected by the use of a credit card for the purchase of merchandise or services, no finance charge shall be imposed upon the member or cardholder on such extension of credit if payment in full of the unpaid balance owing for extensions of credit for merchandise or services is received at the place designated by the credit union prior to the payment due date, which shall be at least 25 days later than the billing date.

D. Notwithstanding any provision of this chapter other than § 6.2-327 and subsection C, a credit union engaged in extending credit under an open-end credit plan may impose, on credit extended under the plan, finance charges and other charges and fees at such rates and in such amounts and manner as may be agreed upon by the credit union and the obligor, if under the plan a finance charge is imposed upon the obligor.

1987, c. 622, § 6.1-330.64; 2006, c. 753; 2010, c. 794; 2015, cc. 453, 454.

§ 6.2-319. Loans by pension plans to participants.

A. As used in this section, "pension plan" includes an "employee pension benefit plan" or "pension plan" as defined in § 3(2) of the federal Employee Retirement Income Security Act of 1974 (P.L. 93-406, 88 Stat. 829).

B. Loans by a pension plan to an individual participating in the pension plan shall be lawfully enforced as agreed in the contract of indebtedness. No such participating individual, by way of defense or otherwise, shall avail himself of the provisions of this chapter, or any other law relating to interest or usury, to avoid or defeat the payment of interest or any other sum on any loan made by the pension plan. Nothing contained in any law relating to interest or usury shall be construed to prevent the recovery of such interest or other sum though it is more than otherwise lawful interest and though that fact appears on the face of the contract.

1987, c. 622, § 6.1-330.67; 2010, c. 794.

§ 6.2-320. Loans by industrial loan associations.

A. Notwithstanding any statutory or case law relating to interest or usury, loans made by an industrial loan association payable in weekly, monthly, or other periodic installments may be enforced as agreed in the contract of indebtedness. In addition, such association may charge or collect in advance from the borrower on such loans a loan fee not exceeding two percent of the principal amount of the loan. An interest rate charged in advance upon the entire amount of the loan or pursuant to a written modification agreement shall be lawful.

B. An industrial loan association may charge interest at an annual rate not exceeding 18 percent on loans payable on demand or in a single payment. In addition, such association may charge or collect in advance from the borrower on such loans a loan fee not exceeding two percent of the principal amount of the loan.

1987, c. 622, § 6.1-330.68; 2010, c. 794.

§ 6.2-321. Loans pursuant to stock option financing programs.

A. As used in this section, "stock option financing program loan" means a loan pursuant to which a lender finances the option holder's exercise of the option to purchase stock, which exercise is financed through such means as purchasing the stock on margin, selling sufficient shares of the stock to cover the total exercise cost, or selling the full quantity of stock to cover the total exercise cost.

B. No person shall, by way of defense or otherwise, avail himself of the provisions of this chapter, or any other statutory or case law relating to usury or compounding of interest, to avoid or defeat the payment of interest, or any other sum, in connection with a loan made to a person pursuant to a stock option financing program loan.

2003, c. 439, § 6.1-330.78:1; 2010, c. 794.

§ 6.2-322. Extensions of credit on pledged securities.

A broker-dealer licensed by the Commission and registered with the Securities Exchange Commission who extends credit to a customer on pledged securities as permitted under the provisions of the Securities Exchange Act of 1934, may charge the customer, on his debit balances that are payable on demand, interest at a annual rate that does not exceed one and three-quarters percent above the higher of:

1. The interest rate charged such broker-dealer by a bank doing business in the Commonwealth on loans collateralized by securities; or

2. The interest rate charged such broker-dealer by a bank doing business in the Commonwealth on loans for business purposes.

1987, c. 622, § 6.1-330.65; 2010, c. 794.

§ 6.2-323. Educational loans by banks or savings institutions.

Notwithstanding any statutory or case law relating to interest or usury, including the deferral and capitalization of interest, any loan made by a bank or savings institution to defray educational expenses, including tuition, fees, books, supplies, room, board, and personal expenses, shall be lawfully enforced as agreed in the contract of indebtedness.

1987, c. 622, § 6.1-330.60; 1996, c. 242; 1997, c. 128; 1999, c. 610; 2001, c. 743; 2010, c. 794.

§ 6.2-324. Educational loans by private institution of higher education.

A. As used in this section, "private institution of higher education" means an accredited nonprofit private institution of higher education in the Commonwealth whose primary purpose is to provide collegiate or graduate education.

B. Loans made by a private institution of higher education to defray educational expenses of its students, including tuition, fees, books, supplies, room, board, and personal expenses, may be enforced as agreed in the contract of indebtedness.

1987, c. 622, § 6.1-330.66; 2010, c. 794.

§ 6.2-325. Certain loans secured by first deed of trust or mortgage.

A. As used in this section, "real estate" includes a leasehold estate of not less than 25 years.

B. Notwithstanding the provisions of any law relating to interest or usury, contracts made for the loan of money, secured or to be secured by a first deed of trust or first mortgage on real estate, or by a first priority security interest in the stock of a residential cooperative housing corporation, may be enforced as agreed in the contract of indebtedness or other agreement signed by the borrower.

C. For the purpose of this section, an interest rate which varies in accordance with any exterior standard, or which cannot be ascertained from the contract without reference to any exterior circumstances or documents, shall be enforceable as agreed in the contract of indebtedness or other signed agreement.

D. Disclosure of charges in a disclosure given to the borrower pursuant to federal disclosure laws or regulations and acceptance of the loan proceeds by the borrower shall be deemed an agreement signed by the borrower within the meaning of this section.

1987, c. 622, § 6.1-330.69; 2010, c. 794.

§ 6.2-326. Fees and charges in connection with loans by real estate lenders.

A. A lender engaged in making real estate mortgage or deed of trust loans, other than loans subject to the provisions of §§ 6.2-327 and 6.2-328, may:

1. Charge or collect in advance from the borrower a loan fee as agreed between the parties; and

2. Require the borrower to pay the reasonable and necessary charges in connection with making the loan, including the cost of title examination, title insurance, recording and filing fees, taxes, insurance, including mortgage guaranty insurance, appraisals, credit reports, surveys, drawing of papers, and closing the loan.

B. The fees and charges permitted by this section and other sections of this chapter are in addition to those permitted by § 6.2-325 and may be added to the principal of the loan, and shall not be considered in determining whether a loan contract is usurious.

1987, c. 622, § 6.1-330.70; 1990, c. 3; 2010, c. 794.

§ 6.2-327. Certain loans secured by a subordinate deed of trust or mortgage.

A. As used in this section:

"Exempt subordinate mortgage lender" means (i) a bank, savings institution, industrial loan association, or credit union or (ii) a seller in a real estate sales transaction who takes a subordinate mortgage or deed of trust on such real estate.

"New money" means money advanced in excess of the outstanding principal balance at the time a new advance is made.

"Real estate" includes a leasehold estate of not less than 25 years.

"Residential real estate" means real estate improved by the construction thereon of housing consisting of one- to four-family dwelling units.

B. An add-on interest loan shall be subject to the following provisions:

1. Any person may charge add-on interest that results in an annual yield of not more than 18 percent upon loans secured in whole or in part by a subordinate mortgage or deed of trust on residential real estate;

2. An add-on interest loan may be made only under this subsection and shall not exceed a period of five years and one month; and

3. The lender may also impose a loan fee not exceeding two percent of the principal amount of the loan provided that such loan fee shall not be imposed more often than once each 18 months except to the extent that new money is advanced within such 18-month period by a renewal or additional loan. New money shall be money advanced in excess of the outstanding principal balance at the time such new advance is made. These provisions shall apply whether such loan fee is payable directly to the lender or to a third party in connection with such loan.

C. No charge, other than actual costs documented to the applicant and expended for a credit report and an appraisal of the real estate conducted in connection with the loan application, may be made if a loan secured by a subordinate mortgage or deed of trust is not made. Such charge:

1. Shall not exceed one percent of the amount of the loan applied for; but in no event shall such charge exceed $50 or one-half of such costs, whichever is less; and

2. May be made only if the lender commits to make the loan. Such commitment shall be in writing and signed by the lender or a person who the lender has authorized to execute such documents.

D. Any loan secured by a subordinate mortgage or deed of trust on residential real estate upon which the interest is charged at an annual interest rate on the unpaid balance thereof shall be subject to the following provisions:

1. Such a loan may be lawfully enforced at the annual interest rate stated in the contract of indebtedness on the principal amount of the loan. Such annual interest rate may vary in accordance with an exterior standard;

2. In addition to the annual interest rate permitted by subdivision 1, the lender may charge the borrower a loan fee not exceeding five percent of the principal amount of the loan, provided that such loan fee shall not be imposed more often than once each 18 months except to the extent that new money is advanced within such 18-month period by a renewal or additional loan. Such loan fee may only be reimposed by the lender upon a borrower in connection with the refinancing of a loan made pursuant to this subsection; and

3. The lender may charge the borrower with the actual costs of the loan as permitted by § 6.2-328.

E. The rates, charges and other provisions permitted or required by this section or by § 6.2-328 shall apply to all loans secured by a subordinate mortgage or deed of trust, including, without limitation, (i) single maturity loans, (ii) amortizing loans, and (iii) loans secured by a credit line deed of trust as permitted by § 55.1-318.

F. Except for the loan fee permitted in this section, no discount, initial interest, points or charges by any other name may be collected, charged or added to a loan secured by a subordinate mortgage or deed of trust upon residential real estate.

G. The provisions of this section shall not apply to any loan by an exempt subordinate mortgage lender.

H. For the purpose of this section, an interest rate that varies in accordance with any exterior standard, or that cannot be ascertained from the contract without reference to any exterior circumstances or documents, shall be enforceable as agreed in the contract of indebtedness or other signed agreement.

I. The borrower under any loan to which the provisions of this section apply may assert any defense or claim he may have under §§ 6.2-304 and 6.2-305 against any assignee or transferee of the contract of indebtedness.

1987, c. 622, §§ 6.1-330.59, 6.1-330.69, 6.1-330.71; 1991, c. 157; 1996, c. 243; 2010, c. 794.

§ 6.2-328. Charges allowed on loan secured by subordinate mortgage.

A. Any lender making a loan secured by a subordinate mortgage or deed of trust may require the borrower to pay, in addition to the loan fee and interest permitted by § 6.2-327, the actual cost of a credit report, title examination, title insurance, mortgage guaranty insurance, recording fees, surveys, attorney fees, appraisal fees, and a fee to determine if the property securing the loan is located in a special flood hazard area. No other charges of any kind shall be imposed on or be payable by the borrower either to the lender or any other party in connection with such loan other than:

1. A fee charged by the settlement agent as defined in § 55.1-1000;

2. Late charges in the amount specified in § 6.2-400 and a prepayment penalty permitted under § 6.2-423 that are contracted for; and

3. Upon default, court costs, attorney fees, trustee's commission, and other expenses of collection to which the borrower may be subject as otherwise permitted by law.

B. Broker's or finder's fees may be paid by the lender from the loan fee or interest permitted under § 6.2-327. A broker's fee, finder's fee, or commission not to exceed five percent of the principal amount of the loan may be paid by the borrower if the total of the loan fee permitted under § 6.2-327 and the broker's fee, finder's fee, or commission does not exceed five percent of the principal amount of the loan.

C. The premium for any insurance required or provided pursuant to § 6.2-411 shall not be considered a charge imposed on or payable by the borrower in connection with the loan.

D. No charge may be imposed or collected, except as permitted by § 6.2-327, if the loan is not made.

E. This section shall not apply to any loan made by (i) a bank, savings institution, industrial loan association, or credit union or (ii) a seller in a real estate sales transaction who takes a subordinate mortgage or deed of trust on such real estate.

F. The borrower under any loan to which the provisions of this section apply may assert any defense or claim he may have under §§ 6.2-304 and 6.2-305 against any assignee or transferee of the contract of indebtedness.

1987, c. 622, § 6.1-330.72; 1993, c. 774; 1995, c. 75; 1996, c. 243; 1998, cc. 69, 89; 2010, c. 794.

§ 6.2-329. Loans insured or guaranteed by certain governmental agencies.

A. No person shall, by way of defense or otherwise, avail himself of any of the provisions of this chapter or any other law relating to usury or any statutory or case law relating to compounding of interest to avoid or defeat the payment of any interest or any other sum which he has contracted to pay on any loan:

1. Insured by the Federal Housing Administration, pursuant to the provisions of the National Housing Act (12 U.S.C. § 1701 et seq.);

2. Guaranteed by the U.S. Department of Veterans Affairs, pursuant to Title 38 of the United States Code; or

3. Insured or guaranteed by any similar federal governmental agency or organization, or made directly or indirectly by the Virginia Housing Development Authority pursuant to the provisions of Chapter 1.2 (§ 36-55.24 et seq.) of Title 36.

B. Nothing contained in this chapter shall be construed to prevent the recovery of such interest or any other sum from any person who has contracted to pay the same in connection with any loan described in this section.

1987, c. 622, § 6.1-330.74; 2010, c. 794.

Chapter 4 - Certain Lending Practices

Article 1 - LATE CHARGES AND REBATES OF UNEARNED INTEREST

§ 6.2-400. Amount of late charge; when charge can be made.

A. As used in this section:

"Late charges" does not include charges imposed upon acceleration of the entire debt or costs of collection and attorney fees as otherwise permitted by law by reason of a default by the debtor.

"Timely payment" means a payment made by the date fixed for payment or within a period of seven calendar days after such due date.

B. Any lender or seller may impose a late charge for failure to make timely payment of any installment due on a debt, whether installment or single maturity, provided that such late charge does not exceed five percent of the amount of such installment payment and that the charge is specified in the contract between the lender or seller and the debtor.

C. If any federal governmental agency or organization shall adopt any rules or regulations dealing with the application of late penalties as to loans insured or guaranteed by such federal agency or organization, then such rules and regulations shall control as to such loans insured or guaranteed by them.

D. Any provision for late charges in excess of the amount permitted by this section shall be void as to such excess but shall not otherwise affect the validity of the obligation.

1987, c. 622, § 6.1-330.80; 2010, c. 794.

§ 6.2-401. Acceleration clause in note evidencing installment loan; effect of acceleration.

A. Any note or other contract evidencing an installment loan or other installment sales obligation with add-on interest may provide that the entire unpaid loan balance, at the option of the holder, shall become due and payable upon default in payment of any installment without impairing the negotiability of the note, if otherwise negotiable.

B. Upon such acceleration, the holder of the contract of indebtedness shall not be entitled to judgment for unearned interest, but the balance owing shall be computed as follows:

1. On loans payable in equal periodic installments with an initial maturity and corresponding amortization period not exceeding 61 months, the accelerated balance shall be calculated as if the borrower had made a voluntary prepayment and obtained as of the date of acceleration an interest credit based upon the Rule of 78 rebate method as defined in § 6.2-403; and

2. On other loans, the accelerated balance shall be calculated under a method at least as favorable to the borrower as the actuarial method.

C. The accelerated balance shall bear interest at the rate shown, or that should have been shown as the annual percentage rate under a truth in lending disclosure pursuant to federal law if the transaction was a consumer credit transaction.

1987, c. 622, § 6.1-330.89; 1990, c. 338; 1991, cc. 171, 365; 2010, c. 794.

§ 6.2-402. Notice of use of Rule of 78 rebate method.

Where any loan or sale on credit contains a provision that a rebate of unearned interest shall be calculated in accordance with the Rule of 78 rebate method as defined in § 6.2-403, the note or other instrument evidencing the loan or sale on credit shall contain a notice advising the borrower of the effect of the interest calculation. The notice shall be in all capital letters and in 10-point type, and shall be substantially as follows:

NOTICE: IF YOU PAY THIS LOAN OR SALE ON CREDIT PARTIALLY OR IN FULL BEFORE ITS DUE DATE, THE AMOUNT OF INTEREST YOU PAY WILL BE GREATER THAN THE AMOUNT OF INTEREST YOU WOULD PAY FOR A SIMPLE INTEREST LOAN OF THE SAME PRINCIPAL AMOUNT.

1990, c. 941, § 6.1-330.85:1; 2010, c. 794.

§ 6.2-403. The Rule of 78.

A. The Rule of 78 is so named because the integers one through 12 added together total 78.

B. The amount of the rebate of unearned interest to be credited upon the acceleration or anticipation of a loan on which such rebate is required to be calculated under the Rule of 78 shall be calculated as follows:

1. Determine the denominator of the fraction, to be used as provided in subdivision 3, by adding the integers corresponding to the number of months over which the loan is to be repaid according to its terms, which in the example of a four-year loan would be the sum obtained by adding all of the integers in the series one through 48.

2. Determine the numerator of the fraction, to be used as provided in subdivision 3, by adding in inverse sequence the integers corresponding to the number of months remaining on the loan after payment is anticipated, which in the example of a four-year loan anticipated after the third month, would be the sum obtained by adding all of the integers in the series 45 through one.

3. Multiply the original amount of interest that would have been paid over the life of the loan by a fraction that has as its denominator the number determined as in subdivision 1 and as its numerator the number determined as in subdivision 2. The product is the amount of unearned interest to be rebated under the Rule of 78.

C. Payment anticipated between scheduled payment dates shall not be considered but instead the succeeding scheduled payment date shall be used in determining the amount of unearned interest to be rebated under the Rule of 78 pursuant to this section.

1987, c. 622, § 6.1-330.86; 2010, c. 794.

§ 6.2-404. When use of Rule of 78 prohibited or permitted.

A. The Rule of 78 shall not be used to determine the amount of unearned interest to be rebated if payment of the debt is anticipated on any (i) loan of money made after January 1, 1991, with an initial maturity of more than 61 months; or (ii) sales contract made after January 1, 1991, that necessitates a loan as described in clause (i).

B. On any loan of money made with an initial maturity and corresponding amortization period of 61 months or less and that is payable in equal periodic installments, the Rule of 78 may be used to determine the amount of unearned interest to be rebated if payment of the debt is anticipated on the loan or contract.

1990, c. 338, § 6.1-330.86:1; 1991, c. 171; 2010, c. 794.

§ 6.2-405. References to sections regulating rebates of unearned interest and prepayment penalties.

A. This article does not affect the application of §§ 6.2-420 through 6.2-423 regarding the imposition of prepayment penalties or rebates of unearned interest on certain loans secured by a lien on real estate.

B. This article does not affect the application of § 6.2-1409 regarding the imposition of prepayment penalties or rebates of unearned interest on loans made by an industrial loan association.

2010, c. 794.

Article 2 - LOANS SECURED BY LIEN ON REAL ESTATE

§ 6.2-406. Disclosure of terms of mortgage application.

A. Any lender making, or broker arranging, loans secured by a first mortgage or first deed of trust on owner occupied residential real estate consisting of one- to four-family dwelling units shall provide, at the time an application for such a loan is submitted by a loan applicant, to the loan applicant a written statement that:

1. Describes when the interest, points, and fees quoted will be locked in; and

2. Provides a good faith estimate of the processing time required for the loan. The estimate shall take into account the time needed for the performance of any local government inspections or other functions necessary to close the loan.

B. The requirements of subsection A shall not apply to any lender making 10 or fewer loans secured by a first mortgage or first deed of trust on such owner occupied residential real estate in any 12-month period.

1988, c. 311, § 6.1-2.9:5; 2010, c. 794; 2016, c. 328.

§ 6.2-407. Lenders to furnish borrower with copy of appraisal.

Any lender that requires a borrower or prospective borrower to pay for an appraisal of residential real estate made in connection with a loan or application for a loan secured by the real estate shall, upon request by the borrower or prospective borrower, furnish free of charge the borrower or prospective borrower with a copy of the written appraisal or, if no written appraisal exists, with a statement of the appraised value within 10 business days of the receipt of such request.

1979, c. 101, § 6.1-2.9; 1988, c. 155; 1990, c. 7; 2010, c. 794.

§ 6.2-408. Priority of interest on debts secured by mortgage or deed of trust.

Interest that is charged pursuant to a written agreement, whether or not recorded, shall be of equal priority with the principal debt secured by the mortgage or deed of trust and shall have priority as to third parties as provided in Title 55.1.

1987, c. 622, § 6.1-330.69; 2010, c. 794.

§ 6.2-409. Addition of unpaid interest to principal balance.

A. For the purpose of this section:

"First deed of trust" or "first mortgage" includes all deeds of trust and mortgages, and amendments thereto, that are made by the same grantor or mortgagor, secure notes held by the same holder, convey substantially the same real estate, and are superior to all other deeds of trust or mortgages on the real estate.

"Grantor" or "mortgagor" includes an owner of real estate, and spouse, who has assumed responsibility for the obligation secured by such deed of trust or mortgage encumbering the real estate.

"Real estate" includes a leasehold estate of not less than 25 years.

B. Notwithstanding any other statutory or case law relating to compounding of interest, if regularly scheduled periodic payments on an obligation secured by a first mortgage or first deed of trust on real estate are insufficient to pay currently accruing interest on the then principal balance, an agreement in the contract of indebtedness, or other agreement signed by the borrower, providing for the addition of such unpaid interest to the principal balance and the future accrual of interest on such balances, shall be enforceable as written.

C. Disclosure of charges in a disclosure given to the borrower pursuant to federal disclosure laws or regulations and acceptance of the loan proceeds by the borrower shall be deemed an agreement signed by the borrower within the meaning of this section.

1987, c. 622, § 6.1-330.69; 2010, c. 794.

§ 6.2-410. Borrowers not to be required to employ particular professionals.

In the case of loans secured by deeds of trust or mortgages on one- to four-family dwelling units, the lender may not require the borrower to use the services of a particular attorney, surveyor, or insurer. The lender shall have the right to approve any attorney, surveyor, or insurer selected by the borrower, provided such approval is not unreasonably withheld.

1987, c. 622, § 6.1-330.70; 1990, c. 3; 2010, c. 794.

§ 6.2-411. Requirements relating to insurance.

A. Any lender making a loan secured by a subordinate mortgage or deed of trust, as defined in § 6.2-300, may require the borrower to provide:

1. Evidence of flood insurance if the security property is located in a special flood hazard area;

2. Evidence of fire and extended coverage insurance; and

3. Decreasing term life insurance, in an amount not exceeding the amount of the loan and for a period not exceeding the term of the loan.

B. At the option of the borrower, accident and health insurance and involuntary unemployment insurance may be provided by the lender.

C. Proof of all insurance issued in connection with loans subject to this chapter shall be furnished to the borrower within 10 days from the date the loan is closed.

1987, c. 622, § 6.1-330.72; 1993, c. 774; 1995, c. 75; 1996, c. 243; 1998, cc. 69, 89; 2010, c. 794.

§ 6.2-412. Insurance coverage under certain loans not to exceed replacement value of improvements.

A. As used in this section:

"Flood insurance coverage" means insurance against loss or damage to any property caused by flooding or the rising of the waters of the ocean or its tributaries.

"Property insurance coverage" means insurance against losses or damages caused by perils that commonly are covered in insurance policies described with terms similar to "standard fire" or "standard fire with extended coverage."

B. No lender shall require a borrower, as a condition to receiving or maintaining a loan secured by any mortgage or deed of trust, to provide or purchase property insurance coverage or flood insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement value of the improvements on the real property.

C. In determining the replacement value of the improvements on any real property, the lender may:

1. Accept the value placed on the improvements by the insurer; or

2. Use the value placed on the improvements that is determined by the lender's appraisal of the real property.

D. A violation of this section shall not affect the validity of the mortgage or deed of trust securing the loan.

1989, c. 230, § 6.1-2.6:1; 2010, c. 794; 2014, c. 247.

§ 6.2-413. Obligation of lender to reimburse unused mortgage guaranty insurance premiums.

Any lender that requires, as a prerequisite to its lending money for the purchase of real property, that private mortgage insurance be secured to insure a certain amount of the lender's interest in the property shall return to the person who paid the premium, or other person entitled thereto, any portion of the premium for such insurance that is not used to secure insurance for the lender's interest in the property.

1980, c. 748, § 6.1-2.9:1; 1990, c. 7; 2010, c. 794.

§ 6.2-414. Obligation of person maintaining escrow account to pay taxes and insurance; penalties.

Any lender or other person maintaining escrow accounts for the payment of taxes or insurance, who on receipt of notice thereof, fails to make timely payment therefor, and incurs a penalty or late charge thereon or a cancellation for nonpayment if there are sufficient funds in such escrow account at least five days before such due date to make such payment, shall be liable for the penalty or late charge assessed for late payment and for any loss as a result of the property being uninsured for nonpayment. The lender or other person shall give written notice to any obligor of the payment of such penalty or late charge within five days after such payment is made.

1978, c. 685, § 6.1-2.8; 2010, c. 794.

§ 6.2-415. Lender not to cancel insurance policy at time of refinancing under certain circumstances.

A. No lender shall require a borrower or debtor, for the protection of property securing the credit or lien, to cancel an existing insurance policy on such property at the time of a refinancing solely to change the effective dates of coverage under the policy, unless the expiration date of such policy is within four months of the date of the closing.

B. The provision of subsection A shall not prevent a lender from requesting a new policy when the coverage under the existing policy is inadequate or there is reasonable concern over the soundness or services of the insurer.

1995, c. 175, § 6.1-2.9:6; 2010, c. 794.

§ 6.2-416. Certain mortgages not to prohibit further encumbrance of real property.

Where any loan is secured by a mortgage or deed of trust on real property comprised of one- to four-family residential dwelling units, the note, or mortgage or deed of trust evidencing such loan shall in no way prohibit the further encumbrance of the real property.

1975, c. 398, § 6.1-2.5; 2010, c. 794.

§ 6.2-417. Mortgage or deed of trust to contain notice that debt is subject to call or modification on conveyance of property.

Where any loan is secured by a mortgage or deed of trust on real property comprised of one- to four-family residential dwelling units, and the note or mortgage or deed of trust evidencing or securing the loan contains a provision that the holder of the note secured by such mortgage or deed of trust may accelerate payment of or renegotiate the terms of such loan upon sale or conveyance of the security property or part thereof, then the mortgage or deed of trust shall contain in the body a statement, either in capital letters or underlined, that advises the borrower as follows: "Notice -- The debt secured hereby is subject to call in full or the terms thereof being modified in the event of sale or conveyance of the property conveyed."

1987, c. 622, § 6.1-330.88; 2010, c. 794; 2014, c. 330.

§ 6.2-418. Property owner entitled to written statement of payoff amount.

A. If an obligation is secured by the lien of a deed of trust or mortgage on real estate, and the owner of the real estate is entitled to prepay the obligation secured by the deed of trust or mortgage, the owner shall be entitled to receive from the holder of the obligation a written statement setting forth the total amount to be paid as of a particular date in order to obtain a release of the deed of trust or mortgage.

B. The holder of the obligation secured by the deed of trust or mortgage shall mail or deliver such written statement of the payoff amount to the property owner or his designee within 10 business days of the receipt of a written request for such payoff information from the property owner or his designee if the request contains the loan number and the address or other description of the location of the subject premises.

C. Upon payment in full of the obligation, the holder shall promptly cause the cancelled loan documents to be forwarded to the owner or his designee.

D. An inadvertent error made in the calculation of the payoff amount shall neither release the obligor from the requirement to pay the full amount due under the contract of indebtedness, nor release the holder of the contract of indebtedness from the requirement to return any overpayment to the obligor or his designee.

E. A request for payoff information under this section may be made one time within a 12-month period without charge, and a fee not exceeding $15 may be charged for each additional request made within such period.

1987, c. 622, § 6.1-330.82; 2010, c. 794.

§ 6.2-419. Disclosure of terms of assumption.

A. An owner of residential real estate that is improved by the construction thereon of housing consisting of four or fewer dwelling units and encumbered by a mortgage or deed of trust shall have the right, upon written request to any holder of the obligation secured by the mortgage or deed of trust, to receive a written disclosure of whether the holder will permit a qualified purchaser to assume the mortgage or deed of trust. If the answer is in the affirmative, the holder shall disclose the following information regarding the terms of such assumption:

1. The rate of interest to be assumed, which may vary with an exterior standard;

2. The balance of the escrow account, if any;

3. Any fees and charges to be assessed by the holder against the seller and buyer in connection with the assumption;

4. Usual limitations or requirements placed on the assumption; and

5. Other terms and conditions of the assumption deemed pertinent by the holder.

B. The holder shall state the time period during which the terms disclosed pursuant to subsection A shall be valid, together with any limitations thereon.

C. Any holder receiving such a written request from an owner shall respond in writing within 10 business days of the receipt of the request.

D. Any holder receiving a second or subsequent written request with respect to the same mortgage or deed of trust within any 12-month period may charge a fee, not to exceed $15, for each additional request. The fee shall be paid in advance.

1982, c. 233, § 6.1-2.9:3; 1990, c. 7; 2010, c. 794.

§ 6.2-420. Prepayment penalty not to be collected in certain circumstances.

No lender shall collect or receive any prepayment penalty on loans secured by real property comprised of one- to four-family residential dwelling units if the prepayment results from the enforcement of the right to call the loan upon the sale of the real property that secures the loan. If the loan is prepaid because of sale to a person who the lender has refused to approve for purposes of assuming the loan or failed to approve within 15 days after receipt by it of written request for approval, the prepayment shall be presumed to result from enforcement of the right to call the loan.

1987, c. 622, § 6.1-330.87; 2010, c. 794.

§ 6.2-421. Certain contracts to permit prepayment; amount of prepayment penalty.

A. For the purpose of this section:

1. "First deed of trust" or "first mortgage" includes all deeds of trust and mortgages, and amendments thereto, that are made by the same grantor or mortgagor, secure notes held by the same holder, convey substantially the same real estate, and are superior to all other deeds of trust or mortgages on the real estate; and

2. "Real estate" includes a leasehold estate of not less than 25 years.

B. Every loan contract, except as provided in subsection D, that is secured by a first deed of trust or first mortgage on real estate if the principal amount of the loan is less than $75,000, shall:

1. Permit the prepayment of the unpaid principal at any time; and

2. Not provide for a prepayment penalty in excess of one percent of the unpaid principal balance.

C. Any prepayment penalty provision in violation of subdivision B 2 shall be unenforceable as to the amount in excess of one percent of such balance.

D. The provisions of:

1. Subsections B and C shall not apply to secured or unsecured notes evidencing installment sales contracts; and

2. Subdivision B 2 and subsection C shall not apply to any loan contract that is (i) subject to § 6.2-422 or 6.2-1409 or (ii) governmentally regulated as to prepayment privilege.

1987, c. 622, §§ 6.1-330.69, 6.1-330.81; 2010, c. 794.

§ 6.2-422. Prepayment penalty for loan secured by home occupied by borrower.

The prepayment penalty in the case of a loan secured by a mortgage or deed of trust on a home that is occupied or to be occupied in whole or in part by a borrower shall not exceed two percent of the amount of such prepayment.

1987, c. 622, § 6.1-330.83; 2010, c. 794.

§ 6.2-423. Prepayment of loans secured by certain subordinate mortgages or deeds of trust; rebates for unearned interest.

A. Any borrower under any loan secured by a subordinate mortgage or deed of trust on residential real estate, which loan is subject to the provisions of § 6.2-327, shall have the right to anticipate payment of his debt in whole or in part at any time. If agreed to by the borrower, a lender may contract for a penalty for prepayment of the full amount of the loan if the prepayment penalty shall not exceed two percent of the principal amount prepaid, but no prepayment penalty shall be imposed if:

1. The loan is refinanced or consolidated with the same lender or a subsequent noteholder;

2. The loan is accelerated due to default;

3. A partial prepayment is made; or

4. In the case of an open-end credit plan, as defined in § 6.2-300, where there is a payment of the outstanding balance without a demand to release the subordinate deed of trust or mortgage.

B. If interest has been added to the face amount of a note payable in installments, the borrower shall have the right to a rebate of any unearned interest. On loans with an initial maturity and corresponding amortization period of 61 or fewer months that are payable in equal periodic installments, the rebate shall be computed in accordance with the Rule of 78 as illustrated in § 6.2-403. On loans with an initial maturity of more than 61 months, the rebate shall be computed under a method at least as favorable to the borrower as the actuarial method.

C. The provisions of this section shall not apply to any loan made by (i) a bank, savings institution, industrial loan association, or credit union or (ii) a seller in a real estate sales transaction who takes a subordinate mortgage or deed of trust on such real estate.

1987, c. 622, § 6.1-330.85; 1990, c. 338; 1991, c. 171; 1998, c. 89; 2010, c. 794.

Article 3 - CREDIT CARDS

§ 6.2-424. Definitions.

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

"Cardholder" means the person or organization named on the face of a credit card to whom or for whose benefit the credit card was issued by an issuer.

"Credit card" means any instrument or device, whether known as a credit card, credit plate, or by any other name, issued with or without fee by an issuer for the use of the cardholder in obtaining money, goods, services, or any other thing of value.

"Issuer" means the business organization or financial institution or its duly authorized agent that issues a credit card.

"Payment device" means any credit card, any "accepted card or other means of access" as defined in 15 U.S.C. § 1693a(1), or any card that enables a person to pay for transactions through the use of value stored on the card itself.

1970, c. 324, § 11-30; 2010, c. 794.

§ 6.2-425. Cardholder not liable in absence of request for, consent to issuance of, or use of card.

A. A cardholder who receives a credit card from an issuer, which card the cardholder has not requested nor consented to the issuance of in writing, nor used, shall not be liable for any amount owing because of a use of the credit card.

B. The failure to destroy or return an unsolicited credit card shall neither:

1. Be evidence of a cardholder's request for or consent to the issuance of the credit card, nor

2. Constitute negligence on the part of the cardholder.

C. Use by an authorized agent of the cardholder shall be the equivalent of use by the cardholder. The burden of proving the authority of an agent shall be upon the issuer.

1970, c. 324, § 11-31; 2010, c. 794.

§ 6.2-426. When request, consent, or use not condition precedent to liability.

The request, consent, or use required in § 6.2-425 as a condition precedent to liability shall not be necessary in any instance:

1. Of a credit card that is a renewal of a credit card previously held and used by the cardholder or his authorized agent within 12 months of the renewal date; or

2. Where the card is issued to a customer who has previously established credit with the issuer and has used such credit within 12 months prior to the issuance of the card.

1970, c. 324, § 11-32; 2010, c. 794.

§ 6.2-427. Costs and attorney fee in suit on card; evidence of request or consent.

A. In any suit arising out of the use of a credit card, where the request, consent, or use as required by § 6.2-425 is denied and is not proved, and judgment shall be for the defendant, the court shall assess against the issuer all court costs and shall award the defendant a reasonable attorney fee.

B. For purposes of subsection A, a certified copy of the request or consent shall be admissible as evidence that such request or consent was obtained.

1970, c. 324, § 11-33; 2010, c. 794.

§ 6.2-428. Production of credit card number as condition of check cashing or acceptance prohibited.

A. Except as otherwise provided in subsection D, no person shall, as a means of identification or for any other purpose:

1. Require that a person produce a credit card number for recordation; or

2. Record a credit card number in connection with (i) a sale of goods or services in which a purchaser pays by check or (ii) the acceptance of a check.

B. A person aggrieved by a violation of this section shall be entitled to institute an action to recover his actual damages or $100, whichever is greater, and to injunctive relief against any person who has engaged, is engaged, or is about to engage in any act in violation of this section. Such action shall be brought in the general district or circuit court, whichever is appropriate, of any county or city wherein the defendant resides or has a place of business. In the event the aggrieved party prevails, he may be awarded reasonable attorney fees and court costs in addition to any damages awarded.

C. This section shall not be construed to (i) impose liability on any employee or agent of a person, where that employee or agent has acted in accordance with the directions of his employer, (ii) prohibit a person from requesting a purchaser to display a credit card as an indication of creditworthiness or financial responsibility or as identification, and in these instances the type, the issuer, and the expiration date of the credit card may be recorded, or (iii) require acceptance of a check, whether or not a credit card is presented.

D. A person may require production of and may record a credit card number as a condition for cashing a check only where (i) the person requesting the card number has agreed with the issuer to cash checks as a service to the issuer's cardholders, (ii) the issuer has agreed to guarantee cardholder checks cashed by that person, and (iii) the cardholder has given actual, apparent, or implied authority for use of his card number in this manner and for this purpose.

1990, c. 587, § 11-33.1; 2010, c. 794.

§ 6.2-429. Improper use of payment device numbers.

A. No person that accepts payment devices for any purpose shall print on any receipt provided to the holder of the payment device (i) more than the last four digits of the payment device number or (ii) the expiration date.

B. For transactions in which the sole means of recording the person's payment device number is by handwriting or by an imprint or copy of the payment device, no receipt, other than the one original, shall display the information prohibited in subsection A. Returning all copies, including carbons, that do not comply with this section, to the payment device holder or authorized user or destroying such copies and carbons in front of the payment device holder or authorized user shall constitute compliance with this section.

C. The provisions of this section shall apply to all cash registers or other machines or devices that electronically print receipts for payment device transactions that are placed in service on or after July 1, 2003.

D. For all cash registers or other machines or devices that electronically print receipts for payment device transactions in service prior to July 1, 2003, the provisions of this subsection shall not apply until July 1, 2005.

E. Any person violating this section (i) shall be liable to the payment device holder and the issuer for any damages or expenses, or both, including attorney fees, that the payment device holder incurs due to the use of the payment device without the permission of the payment device holder and (ii) may be compelled, in a proceeding instituted in any appropriate court by the attorney for the Commonwealth, to comply with this section by injunction, mandamus, or other appropriate remedy. Without limiting the remedies authorized by this section in a proceeding instituted by the attorney for the Commonwealth, any person failing, neglecting, or refusing to obey any injunction, mandamus, or other remedy obtained pursuant to this section, shall be subject, in the discretion of the court, to a civil penalty not to exceed $1,000 for each violation.

2002, c. 744, § 11-33.2; 2004, c. 793; 2009, c. 373; 2010, c. 794.

§ 6.2-430. Place where transaction occurred; federal Fair Credit Billing Act.

Solely for the purpose of a buyer asserting claims and defenses pursuant to 15 U.S.C. § 1666i, a transaction shall be presumed to have occurred at the mailing address most recently provided by the cardholder to the card issuer, without regard to the location where the last act necessary for the formation of the contract between the cardholder and the party honoring the card took place.

2004, c. 373, § 11-33.3; 2010, c. 794.

§ 6.2-431. Certain cards excepted.

Except as set forth in § 6.2-428, the provisions of §§ 6.2-424 through 6.2-430 shall not apply to any credit card issued by any telephone company that is subject to supervision or regulation by the Commission.

1970, c. 324, § 11-34; 1990, c. 587; 2010, c. 794.

§ 6.2-432. Credit card account disclosures.

Any application form or preapproved written solicitation for an open-end credit card account to be used for personal, family, or household purposes that is mailed to a consumer residing in the Commonwealth by or on behalf of a creditor, whether or not the creditor is located in the Commonwealth, other than an application form or solicitation included in a magazine, newspaper, or other publication distributed by someone other than the creditor, shall contain or be accompanied by a disclosure that satisfies the initial disclosure requirements of Consumer Financial Protection Bureau Regulation Z (12 C.F.R. Part 1026).

1987, cc. 622, 639, 714, §§ 6.1-330.63, 6.1-330.78; 1992, Sp. Sess., c. 4; 1997, c. 112; 2005, c. 670; 2009, cc. 784, 860; 2010, c. 794; 2016, c. 501.

Article 4 - OPEN-END CREDIT PLANS

§ 6.2-433. Amendment to open-end credit contract or plan by bank or savings institution.

A. Any open-end credit plan, as defined in § 6.2-300, by a bank or savings institution may be amended in any respect by the bank or savings institution at any time and from time to time to modify or delete terms, or to add new terms, which new or modified terms and amendment need not be of a kind previously included in or contemplated by such contract or plan, or of a kind integral to the relationship of the parties, by following the procedures, if any, set forth in the contract or plan for effecting changes in the terms thereof, subject to the bank's or savings institution's complying with any applicable notice requirements under the Truth in Lending Act (15 U.S.C. § 1601 et seq.) and regulations promulgated thereunder, as in effect from time to time.

B. Unless the contract or plan referred to in subsection A otherwise expressly provides, a bank or savings institution may amend such contract or plan in any respect at any time and from time to time, whether or not the amendment or the subject of the amendment was originally contemplated or addressed by the parties or is integral to the relationship between the parties. Without limiting the foregoing, such amendment may change terms by the addition of new terms or by the deletion or modification of existing terms, whether relating to plan benefits or features, the periodic rate or rates used to calculate finance charges, the manner of calculating periodic rate finance charges or outstanding unpaid indebtedness, variable schedules or formulas, finance charges other than periodic rate finance charges, other charges or fees, collateral requirements, methods for obtaining or repaying extensions of credit, attorney fees, plan termination, the manner for amending the terms of the contract or plan, arbitration or other alternative dispute resolution mechanisms, or other matters of any kind whatsoever. Unless the contract or plan otherwise expressly provides, any amendment may, on and after the date upon which it becomes effective as to a particular borrower, apply to all then outstanding unpaid indebtedness in the borrower's account under the contract or plan, including any such indebtedness that arose prior to the effective date of the amendment. A contract or plan may be amended pursuant to this subsection regardless of whether the contract or plan is active or inactive or whether additional borrowings are available thereunder. Any such amendment may become effective as determined by the bank or savings institution, subject to compliance by the bank or savings institution with any applicable provisions under the Truth in Lending Act (15 U.S.C. § 1601 et seq.) and the regulations promulgated thereunder, as in effect from time to time. Any notice of an amendment sent by the bank or savings institution may be included in the same envelope with a periodic statement or as part of the periodic statement or in other materials sent to the borrower.

1987, cc. 622, 639, 714, § 6.1-330.63; 1992, Sp. Sess., c. 4; 1997, c. 112; 2005, c. 670; 2010, c. 794.

§ 6.2-434. Law governing open-end credit contract or plan by bank or savings institution.

An open-end credit plan, as defined in § 6.2-300, between a bank or savings institution and an obligor, or any plan which permits an obligor to avail himself of the credit so established, shall be governed solely by federal law, and by the laws of the Commonwealth, unless otherwise expressly agreed in writing by the parties.

1987, cc. 622, 639, 714, § 6.1-330.63; 1992, Sp. Sess., c. 4; 1997, c. 112; 2005, c. 670; 2010, c. 794.

§ 6.2-435. Law governing open-end credit contract or plan by seller or lender.

An open-end credit plan as defined in § 6.2-300, between a seller or lender and an obligor shall be governed solely by federal law and by the laws of the Commonwealth.

1987, cc. 622, 639, 714, § 6.1-330.78; 1992, Sp. Sess., c. 4; 1997, c. 112; 2009, cc. 784, 860; 2010, c. 794; 2020, cc. 1215, 1258.

Article 5 - ADDITIONAL PROVISIONS APPLICABLE TO CONSUMER CREDIT

§ 6.2-436. Compliance with federal law.

Every person subject to the provisions of 15 U.S.C. § 1601 et seq. and Consumer Financial Protection Bureau Regulation Z (12 C.F.R. Part 1026) shall comply with such statutes and regulations when offering or extending consumer credit as defined therein. A lender who fails to comply with this section shall not be subject to any liability or penalty beyond those imposed by such federal statutes and regulations.

1987, c. 622, § 6.1-330.79; 2010, c. 794; 2016, c. 501.

§ 6.2-437. Right of buyer of consumer goods to refinance certain payments; agreements as to fluctuation in schedule of payments.

A. In any sales transaction, except one pursuant to an open-end account, involving exclusively consumer goods as defined in subdivision (a) (23) of § 8.9A-102 in which credit is extended and a security interest in consumer goods is taken, any installment payment, other than a down payment made prior to or contemporaneously with the execution of an agreement evidencing the transaction, that is more than 10 percent greater than the regular or recurring installment payments, shall be subject to the buyer's right to refinance such a payment on the basis of an extended period of time. Such additional payments shall be in amounts that shall allow the unpaid balance to be paid in as few periodic payments, not more than 10 percent greater than the regularly scheduled installment payments, as are required to pay such balance. Such additional payments shall be considered and treated as part of the original transaction.

B. The parties may agree in a separate writing that one or more payments or the intervals between one or more payments shall be reduced or expanded in accordance with the desires or needs of the buyer, if such fluctuations in the schedule of payments are expressly arranged to coincide with the anticipated fluctuations in the buyer's capability to make such payments.

C. No seller who has refused to refinance in compliance with the provisions of this section shall be entitled (i) to the return or repossession of the goods involved in the transaction or (ii) to a judgment for the unpaid balance involved in the transaction at the time of his failure to do so.

1987, c. 622, § 6.1-330.90; 2010, c. 794.

Chapter 5 - EQUAL CREDIT OPPORTUNITIES

§ 6.2-500. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Adverse action" means a denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested. The term does not include a refusal to extend additional credit under an existing credit arrangement where the applicant is delinquent or otherwise in default, or where such additional credit would exceed a previously established credit limit.

"Applicant" means any person who applies to a creditor directly for an extension, renewal, or continuation of credit, or applies to a creditor indirectly by use of an existing credit plan for an amount exceeding the previously established credit limit.

"Credit" means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment or to purchase property or services and defer payment therefor.

"Creditor" means any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.

1975, c. 627, § 59.1-21.20; 1977, c. 589; 2010, c. 794.

§ 6.2-501. Prohibited discrimination.

A. As used in this section, "age" means being an individual who is at least 18 years of age.

B. It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction:

1. On the basis of race, color, religion, national origin, sex, marital status, sexual orientation, gender identity, pregnancy, childbirth or related medical conditions, age, disability, or status as a veteran provided that the applicant has the capacity to contract; or

2. Because all or part of the applicant's income derives from any public assistance or social services program.

C. It shall not constitute discrimination for purposes of this chapter for a creditor:

1. To make an inquiry of marital status if such inquiry is for the purpose of ascertaining the creditor's rights and remedies applicable to the particular extension of credit and not to discriminate in a determination of creditworthiness;

2. To make an inquiry of the applicant's age or of whether the applicant's income derives from any public assistance or social services program if such inquiry is for the purpose of determining the amount and probable continuance of income levels, credit history, or other pertinent element of creditworthiness as provided in regulations of the Commission;

3. To use any empirically derived credit system which considers age if such system is demonstrably and statistically sound in accordance with regulations of the Commission, except that in the operation of such system the age of an elderly applicant may not be assigned a negative factor or value; or

4. To make an inquiry or to consider the age of an elderly applicant when the age of such applicant is to be used by the creditor in the extension of credit in favor of such applicant.

D. It is not a violation of this section for a creditor to refuse to extend credit offered pursuant to:

1. Any credit assistance program expressly authorized by law for an economically disadvantaged class of persons;

2. Any credit assistance program administered by a nonprofit organization for its members or an economically disadvantaged class of persons; or

3. Any special purpose credit program offered by a profit-making organization to meet special social needs which meets standards prescribed in regulations by the Commission, if such refusal is required by or made pursuant to such program.

1977, c. 589, § 59.1-21.21:1; 2002, c. 747; 2010, c. 794; 2020, cc. 1137, 1140.

§ 6.2-502. Notification of action on credit application.

Within 30 days, or such longer reasonable time as specified in regulations of the Commission for any class of credit transaction, after receipt of a completed application for credit, a creditor shall notify the applicant of its action on the application.

1977, c. 589, § 59.1-21.21:1; 2002, c. 747; 2010, c. 794.

§ 6.2-503. Statement of reasons for adverse action.

A. Each applicant against whom adverse action is taken shall be entitled to a statement of reasons for the action on the application from the creditor. A creditor shall satisfy this obligation by:

1. Providing statement of reasons in writing as a matter of course to applicants against whom adverse action is taken; or

2. Giving written notification of adverse action that discloses (i) the applicant's right to a statement of reasons within 30 days after receipt by the creditor of a request made within 60 days after such notification and (ii) the identity of the person or office from which such statement may be obtained. The statement may be given orally if the written notification advises the applicant of his right to have the statement of reasons confirmed in writing on written request.

B. A statement of reasons meets the requirements of this section only if it contains the specific reasons for the adverse action taken.

C. Where a creditor has been requested by a third party to make a specific extension of credit directly or indirectly to an applicant, the notification and statement of reasons required by this section may be made directly by such creditor, or indirectly through the third party, provided in either case that the identity of the creditor is disclosed.

D. The requirements of subsections A, B, and C may be satisfied by oral statements or notifications in the case of any creditor who did not act on more than 150 applications during the calendar year preceding the calendar year in which the adverse action is taken, as determined under regulations of the Commission.

1977, c. 589, § 59.1-21.21:1; 2002, c. 747; 2010, c. 794.

§ 6.2-504. Requirement of signatures of both parties to a marriage not discriminatory in a secured transaction.

For the purposes of a secured transaction, a request for the signature of both parties to a marriage for the purpose of creating a valid lien, passing clear title, waiving inchoate rights to property, or assigning earnings, shall not constitute discrimination under this chapter. This provision shall not be construed to permit a creditor to take sex or marital status into account in connection with the evaluation of creditworthiness of any applicant.

1975, c. 627, § 59.1-21.22; 1977, c. 589; 2010, c. 794.

§ 6.2-505. Remedies for violation.

A. Any creditor who fails to comply with any requirement imposed under this chapter shall be liable to the aggrieved applicant in an amount equal to the sum of any actual damages sustained by such applicant.

B. Any creditor, other than the federal or state government or any political subdivision or agency of such government, who fails to comply with any requirement imposed under this chapter shall be liable to the aggrieved applicant for punitive damages in an amount not greater than $10,000, as determined by the court, in addition to any actual damages provided in subsection A.

C. Upon application by an aggrieved applicant, an appropriate court may grant such equitable and declaratory relief as is necessary to enforce the requirements imposed under this chapter.

D. In the case of any successful action to enforce the foregoing liability, the costs of the action, together with the reasonable attorney fee as determined by the court, shall be added to any damages awarded by the court under the provisions of subsections A, B, and C.

E. Any action under this chapter may be brought in an appropriate court within two years from the date of the occurrence of the violation.

1975, c. 627, § 59.1-21.23; 1977, c. 589; 2010, c. 794.

§ 6.2-506. Commission regulations.

The Commission shall adopt regulations to effectuate the purposes of this chapter provided that such regulations conform to and are no broader in scope than regulations, and amendments thereto, adopted by the Consumer Financial Protection Bureau under the federal Equal Credit Opportunity Act (15 U.S.C. § 1691 et seq.). Such conforming regulations shall exempt from the coverage of this chapter any class of transactions which may be exempted from time to time from the federal Equal Credit Opportunity Act (15 U.S.C. § 1691 et seq.), by regulations of the Consumer Financial Protection Bureau.

1975, c. 627, § 59.1-21.24; 1977, c. 589; 2010, c. 794; 2016, c. 501.

§ 6.2-507. Limitation on liability.

No provision of this chapter imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof by the Commission or by the Consumer Financial Protection Bureau or officer or employee duly authorized by the Bureau to issue such interpretation or approvals under the comparable provisions of the federal Equal Credit Opportunity Act, (15 U.S.C. § 1691 et seq.), and regulations thereunder, notwithstanding that after such act or omission has occurred, such rule, regulation, or interpretation is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

1975, c. 627, § 59.1-21.24; 1977, c. 589; 2010, c. 794; 2016, c. 501.

§ 6.2-508. Compliance with Equal Credit Opportunity Act constitutes compliance with chapter.

Compliance with the federal Equal Credit Opportunity Act, (15 U.S.C. § 1691 et seq.), as amended, and regulations issued by the Consumer Financial Protection Bureau thereunder, constitutes compliance with this chapter.

1975, c. 627, § 59.1-21.24; 1977, c. 589; 2010, c. 794; 2016, c. 501.

§ 6.2-509. Public to be informed of rights under chapter.

The Commission shall use any methods available to it to inform the public of the rights created by this chapter. Notice given pursuant to the federal Equal Credit Opportunity Act, (15 U.S.C. § 1691 et seq.), and regulations promulgated thereto, shall satisfy the requirements of this section.

1977, c. 589, § 59.1-21.25; 2010, c. 794.

§ 6.2-510. Commission to investigate complaints; records to be open to public.

The Commission shall receive, investigate, and mediate complaints of violations of this chapter and shall keep all records pertaining to such complaints, investigations, and mediations open to the public. Nothing in this section shall toll the operation of subsection E of § 6.2-505.

1977, c. 589, § 59.1-21.26; 2010, c. 794.

§ 6.2-511. Credit standards discoverable.

Nothing in this chapter shall be construed to prohibit the discovery of a creditor's standards for granting credit, which discovery shall be under appropriate discovery procedures in the court in which an action is brought.

1977, c. 589, § 59.1-21.27; 2010, c. 794.

§ 6.2-512. Election of remedies.

Where the same act or omission constitutes a violation of this chapter and of applicable federal law, a person aggrieved by such conduct may bring a legal action to recover monetary damages either under this chapter or under federal law, but not both. This election of remedies shall not apply to court actions in which the relief sought does not include monetary damages or to administrative actions.

1977, c. 589, § 59.1-21.28; 2010, c. 794.

§ 6.2-513. Authority of Attorney General.

Notwithstanding any other provisions of the law to the contrary, the Attorney General may investigate and bring an action in the name of the Commonwealth to enjoin any violation of this chapter.

1970, c. 780, § 59.1-68.2; 1973, c. 537; 1975, c. 43; 1984, c. 582; 2010, c. 794.

Subtitle II - Depository Institutions and Trust Organizations

Chapter 6 - Deposits and Accounts

Article 1 - General Provisions

§ 6.2-600. Repealed.

Repealed by Acts 2013, cc. 30 and 102.

§ 6.2-601. Federal insurance of deposits required for all banks or savings institutions.

Notwithstanding any other provisions contained in this title, no bank or savings institution doing business in the Commonwealth shall accept deposits unless its deposit accounts are insured by the Federal Deposit Insurance Corporation or other federal insurance agency, up to the limits of the insurance provided thereby. No bank or savings institution shall solicit deposits in the Commonwealth, nor shall any other person solicit or accept deposits in the Commonwealth on behalf of a bank or savings institution, unless the deposit accounts of such bank or savings institution are insured by the Federal Deposit Insurance Corporation or other federal insurance agency, up to the limits of the insurance provided thereby.

1986, c. 500, § 6.1-2.9:4; 1990, c. 3; 1996, c. 16; 2010, c. 794.

§ 6.2-602. Adverse claims to accounts.

A. Notice to any financial institution doing business in the Commonwealth of an adverse claim to funds in an account with such institution shall not require the institution to recognize the adverse claim unless the adverse claimant shall either:

1. Procure a restraining order, injunction, or other appropriate order against the financial institution from an appropriate court; or

2. Execute to such financial institution, in form and with sureties acceptable to it, a bond indemnifying the institution from any and all liability, loss, damage, costs, and expenses, for and on account of the payment or recognition of such adverse claim, or the dishonor of, or failure to pay, any check, or failure to comply with any other order, of the person to whose credit the account is held.

B. This section shall not affect the provisions of Article 2 (§ 6.2-604 et seq.) of this chapter governing multiple-party accounts, and any claim by a party to such account shall be determined in accordance with the provisions therein.

C. This section shall not affect any notice of lien pursuant to § 8.01-502, any order of an appropriate court, or the issuance of a notice or other action issued by a state or federal governmental agency.

1996, c. 963, § 6.1-2.9:7; 2010, c. 794.

§ 6.2-603. Medical savings accounts and health savings accounts.

To the extent allowed by federal law, a bank, insured savings institution, or credit union may act as a trustee or custodian of health savings accounts established with financial institutions under § 223 of the United States Internal Revenue Code of 1986, as amended from time to time, and medical savings accounts established with financial institutions under § 220 of the United States Internal Revenue Code of 1986, as amended from time to time. Contributions may be accepted and interest thereon retained by such institution pursuant to forms provided by it and may be invested in accounts of the institution in accordance with the terms upon which such contributions were accepted. The financial institution shall administer such accounts in accordance with the requirements of federal law.

1999, c. 331, § 6.1-2.9:8; 2005, cc. 503, 572; 2010, c. 794.

§ 6.2-603.1. Savings promotions.

A. As used in this section, unless the context requires a different meaning:

"Depository institution" means a bank, savings institution, or credit union that is subject to any provision of this title and that offers savings accounts, share accounts, certificates of deposit, or other savings products or programs.

"Nonqualifying account" means a savings account, share account, certificate of deposit, or other savings product or program offered by a depository institution that is not a qualifying account.

"Qualifying account" means a savings account, share account, share certificate, or other savings product or program offered by a depository institution through which depositors may obtain chances to win prizes in a savings promotion.

"Savings promotion" means a contest or promotion sponsored by a depository institution in which a chance of winning designated prizes is obtained by its depositors for the purposes of encouraging depositors to build and maintain savings deposits.

B. Any depository institution may sponsor a savings promotion in accordance with the provisions of this section, to the extent (i) the savings promotion is not prohibited by federal law or regulation and (ii) the savings promotion complies with the following requirements:

1. Participants in the savings promotion shall not be required to provide any consideration in order to obtain entries to win. For purposes of this subdivision, participants shall not be deemed to have provided consideration due to the requirement that they deposit a specified amount of money for a specified time period in a qualifying account in order to obtain entries to win, provided that:

a. The interest rate associated with any such qualifying account is not reduced when compared with other comparable nonqualifying accounts offered by any depository institution, to account for the possibility of depositors winning specified prizes; and

b. The depository institution does not charge a fee for participating in the savings promotion;

2. All fees charged in connection with a qualifying account shall be comparable with all fees charged in connection with other comparable nonqualifying accounts, if any, offered by the depository institution;

3. The savings promotion shall be conducted such that each entry in the savings promotion has an equal chance of being drawn;

4. Participants in the savings promotion shall not be required to be present at a prize drawing in order to win; and

5. The savings promotion is conducted in a manner that complies with the applicable requirements of Chapter 31 (§ 59.1-415 et seq.) of Title 59.1.

C. For purposes of Article 1 (§ 18.2-325 et seq.) of Chapter 8 of Title 18.2, a savings promotion offered in accordance with this section shall not constitute illegal gambling or otherwise be deemed to entail the promotion of gambling or a lottery.

2015, cc. 12, 154.

Article 2 - Multiple-Party Accounts

§ 6.2-604. Definitions.

As used in this article, unless the context requires a different meaning:

"Account" means a contract of deposit of funds between a depositor and a financial institution, and includes a checking account, savings account, certificate of deposit, share account, and other similar arrangements.

"Beneficiary" means a person named in a trust account as one for whom a party to the account is named as trustee.

"Fiduciary" shall include any one or more of the following: (i) a fiduciary as defined in § 8.01-2, (ii) an agent under a power of attorney, or (iii) an attorney acting under an attorney-client relationship.

"Fiduciary account" means (i) an estate account for a decedent, (ii) an account established by one or more agents under a power of attorney or an existing account of a principal to which one or more agents under a power of attorney are added, (iii) an account established by one or more conservators, (iv) an account established by one or more committees, (v) a regular trust account under a testamentary trust or a trust agreement that has significance apart from the account, or (vi) an account arising from a fiduciary relationship such as an attorney-client relationship. "Fiduciary account" does not include a trust account.

"Financial institution" means any entity authorized to do business under state or federal laws relating to financial institutions that is authorized to establish accounts, including, without limitation, banks, trust companies, savings institutions, and credit unions.

"Joint account" means an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship.

"Multiple-fiduciary account" means a fiduciary account where more than one fiduciary is authorized to act.

"Multiple-party account" means any of the following types of account: (i) a joint account, (ii) a P.O.D. account, or (iii) a trust account. The term does not include accounts established for deposit of funds of a partnership, joint venture, or other association for business purposes, or accounts controlled by one or more persons as the duly authorized agent or trustee for a corporation, unincorporated association, or charitable or civic organization.

"Net contribution" of a party to a joint account as of any given time is the sum of all deposits thereto made by or for him, less all withdrawals made by or for him which have not been paid to or applied to the use of any other party, plus a pro rata share of any interest or any dividends included in the current balance. The term includes, in addition, any proceeds of deposit life insurance added to the account by reason of the death of the party whose net contribution is in question.

"Party" means a person who, by the terms of the account, has a present right, subject to request, to payment from a multiple-party account, including a fiduciary account. The term includes a P.O.D. payee or beneficiary of a trust account only after the account becomes payable to him by reason of his surviving the original payee or trustee. The term includes a guardian, conservator, personal representative, or assignee, including an attaching creditor, of a party. The term also includes a person identified as a trustee of an account for another whether or not a beneficiary is named, but it does not include any named beneficiary unless he has a present right of withdrawal.

"Payment," with respect to sums on deposit, includes withdrawal, payment on check or other directive of a party, and any pledge of sums on deposit by a party and any setoff, or reduction or other disposition of all or part of an account pursuant to a pledge.

"P.O.D. account" means an account payable on request to one person during his lifetime and on his death to one or more P.O.D. payees, or to one or more persons during their lifetimes and on the death of all of them to one or more P.O.D. payees.

"P.O.D. payee" means a person designated on a P.O.D. account as one to whom the account is payable on request after the death of one or more persons.

"Proof of death" includes a death certificate; a certificate of qualification upon a decedent's estate; or an authenticated copy of any record or report of a governmental agency, domestic or foreign, that a person is dead.

"Request" means a proper request for withdrawal, or a check or order for payment, that complies with all conditions of the account, including special requirements concerning necessary signatures and regulations of the financial institution. If the financial institution conditions withdrawal or payment on advance notice, for purposes of this article the request for withdrawal or payment is treated as immediately effective and a notice of intent to withdraw is treated as a request for withdrawal.

"Sums on deposit" means the balance payable on a multiple-party account, including a fiduciary account, including interest, dividends, and in addition any deposit life insurance proceeds added to the account by reason of the death of a party.

"Trust account" means an account in the name of one or more parties as trustee for one or more beneficiaries where the relationship is established by the form of the account and the deposit agreement with the financial institution and there is no subject of the trust other than the sums on deposit in the account, without regard to whether payment to the beneficiary is mentioned in the deposit agreement. The term does not include a fiduciary account.

"Withdrawal" includes payment to a third person pursuant to check or other directive of a party.

1979, c. 407, § 6.1-125.1; 2010, c. 794; 2020, c. 259.

§ 6.2-605. Applicability.

A. The provisions of §§ 6.2-606, 6.2-607, and 6.2-608 concerning beneficial ownership as between parties, or as between parties and P.O.D. payees or beneficiaries of multiple-party accounts, are relevant only to controversies between these persons and their creditors and other successors, and have no bearing on the power of withdrawal of these persons as determined by the terms of account contracts.

B. The provisions of §§ 6.2-612 through 6.2-617 govern the liability of financial institutions that make payments pursuant thereto, and their set-off rights, but shall have no effect on the beneficial ownership of or the power of withdrawal from the accounts between the parties or P.O.D. payees or beneficiaries of multiple-party accounts and shall have no effect on the fiduciary duties or obligations of fiduciaries under the governing instrument of multiple-fiduciary accounts.

1979, c. 407, § 6.1-125.2; 2010, c. 794; 2020, c. 259.

§ 6.2-606. Ownership during lifetime; garnishment, attachment, or levy.

A. A joint account belongs, during the lifetimes of all parties, to the parties in proportion to the net contributions by each to the sums on deposit, except that a joint account between persons married to each other shall belong to them equally, and unless, in either case, there is clear and convincing evidence of a different intent.

B. A P.O.D. account belongs to the original payee during his lifetime and not to any P.O.D. payee. If two or more parties are named as original payees, during their lifetimes rights as between them are governed by subsection A.

C. Unless (i) a contrary intent is manifested by the terms of the account or the deposit agreement or (ii) there is other clear and convincing evidence of an irrevocable trust, a trust account belongs beneficially and absolutely to the trustee during his lifetime. If two or more parties are named as trustee on the account, during their lifetimes beneficial rights as between them are governed by subsection A. If there is an irrevocable trust, the account belongs beneficially to the beneficiary.

D. Upon an order of garnishment, attachment, or other levy addressed to a party to a joint account as mentioned in subsection A, or a trust account as mentioned in subsection C, the financial institution shall:

1. File an answer setting forth the form of account, whether it has funds responsive to the process, and such information as it has as to the names and addresses of the parties to the account;

2. Send a copy of such answer by first class mail to the petitioning creditor or counsel of record;

3. From the time of service of such garnishment, attachment or levy, hold the amount subject to such garnishment, attachment or levy, or such lesser amount or sum as it may have, which amount shall be set forth in its answer; and

4. Not permit any person to draw against such amount whether by check against such account or otherwise.

E. If the petitioning creditor shall desire to pursue the question of ownership of such funds held subject to the claim of two or more parties to the deposit account, it shall (i) provide the clerk of the court that issued the order of garnishment, attachment, or other levy with a copy of the documents originally served on the original defendants or judgment defendants and (ii) request the clerk to issue a summons accompanied by such copy with a copy of a notice to co-depositors containing substantially the following information: "Attached is a copy of the documents served on a financial institution to cause it to withhold money from an account in which you may have an interest. If you wish to protect your interests, you or your attorney should take appropriate legal action promptly."

F. Upon payment of the appropriate fees, the clerk shall issue such summons to be served on any other party having an interest or apparent interest in such account. Service on a party to the account made at the address on record at the financial institution shall be presumed to be proper service for the purposes of this section. In addition, a copy of such summons and notice shall be issued and served on or mailed to both the financial institution and the original defendant or judgment debtor. If such summons is received either by certified or registered mail or acknowledged in writing within 21 days on or by such financial institution, it shall continue to hold such funds pending further order of the court. If such financial institution is not served with, or does not acknowledge, such an order within 21 days from the filing of such answer, it may treat the garnishment, attachment or levy, insofar as it relates to such joint or trust accounts, as terminated on the twenty-second day and being of no further force or effect.

G. The court shall allow the financial institution its reasonable expenses in responding to discovery of its records and may condition any such discovery upon prepayment of such expenses.

H. Orders to withhold and deliver issued by the Department of Social Services shall be complied with as provided in §§ 63.2-1929 and 63.2-1931.

1979, c. 407, § 6.1-125.3; 1982, c. 302; 1983, c. 531; 1987, c. 296; 1988, cc. 368, 547; 1990, c. 950; 2010, c. 794.

§ 6.2-607. Effect of divorce.

Upon the entry of a decree of divorce, either a mensa et thoro or a vinculo matrimonii, all rights of either consort in any multiple-party account then existing between them, including the right of survivorship, shall be extinguished; and any joint account then existing between the consorts shall thereupon be converted into a tenancy in common, in the proportions provided in subsection A of § 6.2-606, unless otherwise ordered by the court.

1979, c. 407, § 6.1-125.4; 2010, c. 794.

§ 6.2-608. Right of survivorship.

A. Sums remaining on deposit at the death of a party to a joint account belong to the surviving party as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created. If there are two or more surviving parties, their respective ownerships during their lifetime shall be in proportion to their previous ownership interests under § 6.2-606 augmented by an equal share for each survivor of any interest the decedent may have owned in the account immediately before his death; and the right of survivorship continues between the surviving parties.

B. If the account is a P.O.D. account:

1. On the death of one of two or more original payees, the rights to any sums remaining on deposit are governed by subsection A;

2. On the death of the sole original payee or of the survivor of two or more original payees, any sums remaining on deposit belong to the P.O.D. payee or payees if surviving, or to the survivor of them if one or more die before the original payee. If two or more P.O.D. payees survive, there is no right of survivorship in the event of death of a P.O.D. payee thereafter unless the terms of the account or deposit agreement expressly provide for survivorship between them.

C. If the account is a trust account:

1. On the death of one of two or more trustees, the rights to any sums remaining on deposit are governed by subsection A;

2. On the death of the sole trustee or the survivor of two or more trustees, any sums remaining on deposit belong to the persons named as beneficiaries, if surviving, or to the survivor of them if one or more die before the trustee, unless there is clear evidence of a contrary intent. If two or more beneficiaries survive the death of the sole trustee or the last survivor of two or more trustees, there is no right of survivorship in the event of death of any beneficiary thereafter unless the terms of the account or deposit agreement expressly provide for survivorship between them.

D. In other cases, the death of any party to a multiple-party account has no effect on beneficial ownership of the account other than to transfer the rights of the decedent as part of his estate. If the terms of the account clearly indicate that there is no right of survivorship, the estate of a decedent party shall succeed to the rights of decedent in such account.

E. A right of survivorship arising from the express terms of the account or under this section, a beneficiary designation in a trust account, or a P.O.D. payee designation, cannot be changed by will.

1979, c. 407, § 6.1-125.5; 1981, c. 53; 2010, c. 794.

§ 6.2-609. Change of form of account upon written order to financial institution.

The provisions of § 6.2-608 as to rights of survivorship are determined by the form of the account at the death of a party. This form may be altered by written order given by a party to the financial institution to change the form of the account or to stop or vary payment under the terms of the account. The order or request shall be signed by a party, received by the financial institution during the party's lifetime, and not countermanded by other written order of the same party during his lifetime.

1979, c. 407, § 6.1-125.6; 2010, c. 794.

§ 6.2-610. Transfers arising from right of survivorship nontestamentary.

Any transfers resulting from the application of § 6.2-608 are effective by reason of the account contracts involved and this article and are not to be considered as testamentary or subject to Chapter 4 (§ 64.2-400 et seq.) of Title 64.2.

1979, c. 407, § 6.1-125.7; 2010, c. 794.

§ 6.2-611. Liability of surviving party for debts and other liabilities of decedent's estate.

A. If the assets of a deceased party's estate, other than the assets in a multiple-party account, are not sufficient to pay the debts, taxes, and expenses of estate administration, including statutory allowances to the surviving spouse, minor children, and dependent children, no transfer of account funds, to which the deceased party was beneficially entitled immediately before his death, shall be effective, by virtue of a party's survivorship of the decedent, against the estate of such deceased party to the extent such funds are needed to pay such liabilities of the estate.

B. A surviving party, P.O.D. payee, or beneficiary who receives payment from a multiple-party account after the death of a deceased party shall be liable to account to his personal representative for amounts the decedent owned beneficially immediately before his death to the extent necessary to discharge the claims and charges described in subsection A that remain unpaid after application of the decedent's estate. No proceeding to assert this liability shall be commenced (i) unless the personal representative has received a written demand by a surviving spouse, a creditor, or one acting for a minor or dependent child of the decedent and (ii) later than two years following the death of the decedent. Sums recovered by the personal representative shall be administered as part of the decedent's estate.

C. This section shall not affect the right of a financial institution to make payment on multiple-party accounts according to the terms thereof, or make it liable to the estate of a deceased party unless, before payment, the institution has been served with process in a proceeding by the personal representative.

1979, c. 407, § 6.1-125.8; 2010, c. 794.

§ 6.2-612. Financial institution duties; multiple-party accounts; multiple-fiduciary accounts.

A. Financial institutions may enter into multiple-party accounts to the same extent that they may enter into single-party accounts. Any multiple-party account may be paid, on request, to any one or more of the parties. A financial institution shall not be required to inquire as to the source of funds received for deposit to a multiple-party account, or to inquire as to the proposed application of any sum withdrawn from an account, for purposes of establishing net contributions.

B. Financial institutions may enter into multiple-fiduciary accounts with more than one fiduciary to the same extent that they may enter into fiduciary accounts with one fiduciary. Any multiple-fiduciary account may be paid, on request, to any one or more of the fiduciaries.

1979, c. 407, § 6.1-125.9; 2010, c. 794; 2020, c. 259.

§ 6.2-613. Payment of sums in joint account.

Any sums in a joint account may be paid, on request, to any party without regard to whether any other party is incapacitated or deceased at the time the payment is demanded. Payment may not be made to the personal representative or heirs of a deceased party under the Virginia Small Estate Act (§ 64.2-600 et seq.) unless (i) proof of death is presented to the financial institution showing that the decedent was the last surviving party or (ii) there is no right of survivorship under § 6.2-608.

1979, c. 407, § 6.1-125.10; 2010, cc. 269, 794.

§ 6.2-614. Payment of P.O.D. account.

Any P.O.D. account may be paid, on request, to any original party to the account. Payment may be made, on request, to the P.O.D. payee or to the personal representative or heirs of a deceased P.O.D. payee under the Virginia Small Estate Act (§ 64.2-600 et seq.) upon presentation to the financial institution of proof of death showing that the P.O.D. payee survived all persons named as original payees. Payment may be made to the personal representative or heirs of a deceased original payee under the Virginia Small Estate Act (§ 64.2-600 et seq.) if proof of death is presented to the financial institution showing that his decedent was the survivor of all other persons named on the account either as an original payee or as P.O.D. payee.

1979, c. 407, § 6.1-125.11; 2010, cc. 269, 794.

§ 6.2-615. Payment of trust account.

Any trust account may be paid, on request, to any trustee. Unless the financial institution has received written notice that the beneficiary has a vested interest not dependent upon his surviving the trustee, payment may be made to the personal representative or heirs of a deceased trustee if proof of death is presented to the financial institution showing that his decedent was the survivor of all other persons named on the account either as trustee or beneficiary. Payment may be made, on request, to the beneficiary upon presentation to the financial institution of proof of death showing that the beneficiary or beneficiaries survived all persons named as trustees.

1979, c. 407, § 6.1-125.12; 2010, c. 794.

§ 6.2-615.1. Payment of multiple-fiduciary account.

Any multiple-fiduciary account may be paid, on request, (i) to any one or more fiduciaries, including any successor fiduciary upon proof showing that the successor fiduciary is duly authorized to act, or (ii) at the direction of any one or more of the fiduciaries. In determining the trustees duly authorized to act, the financial institution may rely on a certification of trust provided pursuant to § 64.2-804.

2020, c. 259.

§ 6.2-616. Discharge of financial institution upon payment.

A. Payment made pursuant to §§ 6.2-612 through 6.2-615 discharges the financial institution from all claims for amounts so paid whether or not the payment is consistent with the beneficial ownership of the account as between parties, P.O.D. payees, beneficiaries, or fiduciaries, or their successors.

B. The discharge provided by subsection A does not extend to payments made after a financial institution has received written notice from any party able to request present payment to the effect that withdrawals in accordance with the terms of the account should not be permitted. Unless the notice is withdrawn by the person giving it, or the successor of any deceased party has concurred in any demand for withdrawal, a discharge provided by subsection A shall not apply to withdrawals permitted by the financial institution.

C. No other notice or any other information shown to have been available to a financial institution shall affect its right to the discharge provided by subsection A. The discharge provided by subsection A shall have no bearing on the rights of parties in disputes between themselves or their successors concerning the beneficial ownership of funds in, or withdrawn from, multiple-party accounts or multiple-fiduciary accounts.

D. If any party, or the personal representative of any party, notifies the financial institution in writing not to permit withdrawals by any party, the financial institution may refuse, without liability, to allow any withdrawal pending the determination of the rights of the parties.

1979, c. 407, § 6.1-125.13; 2010, c. 794; 2020, c. 259.

§ 6.2-617. Setoff by financial institution against account.

Without qualifying any other statutory right to setoff or lien, and subject to any contractual provision, if a party to a multiple-party account is indebted to a financial institution, the financial institution has a right to setoff against the account in which the party has or had immediately before his death a present right of withdrawal. The amount of the account subject to setoff is that proportion to which the debtor is, or was immediately before his death, beneficially entitled, and in the absence of proof of net contributions, to an equal share with all parties having present rights of withdrawal.

1979, c. 407, § 6.1-125.14; 2010, c. 794.

§ 6.2-618. Identification of joint accounts.

A. Every financial institution in the Commonwealth offering joint accounts to its depositors shall either:

1. Use two separate forms for the creation of joint accounts, one of which shall be clearly labeled "JOINT ACCOUNT WITH SURVIVORSHIP" and the other of which shall be clearly labeled "JOINT ACCOUNT -- NO SURVIVORSHIP," provided that a financial institution electing to use separate forms is not required to maintain both forms or make both forms available to persons opening joint accounts and may, in its discretion, elect to make one or both forms available to persons opening joint accounts; or

2. Use one form for the creation of such accounts that shall contain the two labels "JOINT ACCOUNT WITH SURVIVORSHIP" and "JOINT ACCOUNT -- NO SURVIVORSHIP," with appropriate blank space or lines beside such labels for the parties to sign in order to indicate the type of account desired, which signature requirement shall be in addition to any signature verification form.

B. The forms provided for in subdivision A 1 may be identical in all respects except for the labels therein specified. This section shall not be construed to prevent any financial institution from changing from one method of identification to the other method of identification at any time, nor to require a financial institution making such a change to make any changes to the forms of its existing accounts.

C. The forms described in subsection A shall include disclosures to inform persons opening joint accounts of the disposition of such accounts upon a party's death. Disclosures in a form substantially similar to the following shall satisfy the requirements of this section:

Joint Account With Survivorship -- On the death of a party to the account, the deceased party's ownership in the account passes to the surviving party or parties to the account.

Joint Account -- No Survivorship -- On the death of a party to the account, the deceased party's ownership in the account passes as a part of the party's estate under the party's will, trust, or by intestacy.

D. This section is not applicable to joint accounts created before July 1, 1980.

1979, c. 407, § 6.1-125.15; 1999, c. 125; 2010, c. 794; 2013, c. 70.

§ 6.2-619. Certain duties of parties to joint accounts in financial institutions.

A. Parties to a joint account in a financial institution occupy the relation of principal and agent as to each other, with each standing as a principal in regard to his ownership interest in the joint account and as agent in regard to the ownership interest of the other party. The provisions of the Uniform Power of Attorney Act (§ 64.2-1600 et seq.) shall apply to such principal/agent relationships.

B. For the purposes of this section, the ownership interest of the parties to the joint account shall be determined in accordance with the provisions of this article.

1996, c. 260, § 6.1-125.15:1; 2010, cc. 455, 632, 794.

§ 6.2-620. Application of article to accounts existing on July 1, 1980.

A. Unless otherwise provided in this article, the provisions of this article shall be applicable to all multiple-party accounts in every financial institution in the Commonwealth on July 1, 1980, regardless of when such multiple-party accounts might have been opened or created.

B. Nothing in this article shall affect the common-law presumption of convenience now existing between persons not married to each other in joint accounts that were created prior to July 1, 1980, insofar as the ownership of the funds, whenever deposited, during their joint lifetime or their right of survivorship therein are concerned. Issues regarding ownership of such funds shall continue to be decided pursuant to the precedents of the Virginia Supreme Court.

1979, c. 407, § 6.1-125.16; 2010, c. 794.

Chapter 7 - ACQUISITIONS OF INTERESTS IN FINANCIAL INSTITUTIONS

§ 6.2-700. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Acquire" means:

1. The merger or consolidation of one bank holding company with another bank holding company;

2. The acquisition by a bank holding company of direct or indirect ownership or control of voting shares of another bank holding company or a bank, if, after such acquisition, the bank holding company making the acquisition will directly or indirectly own or control more than five percent of any class of voting shares of the other bank holding company or the bank;

3. The direct or indirect acquisition by a bank holding company of all or substantially all of the assets of another bank holding company or of a bank; or

4. Any other action that would result in direct or indirect control by a bank holding company of another bank holding company or a bank.

"Bank" has the same meaning assigned to it in 12 U.S.C. § 1841(c).

"Bank holding company" has the meaning assigned to it in 12 U.S.C. § 1841 (a) (1).

"Financial institution" shall not include any consumer finance company or savings institution.

"Financial institution holding company" means any person that has control over any financial institution or that has control over any person that controls any financial institution.

"Home state" means:

1. With respect to a national bank, the state in which the main office is located;

2. With respect to a state bank, the state by which the bank is chartered; and

3. With respect to a bank holding company, the state in which the total deposits of all banking subsidiaries of such company are the largest on the later of (i) July 1, 1966, or (ii) the date on which the company becomes a bank holding company under the federal Bank Holding Company Act (12 U.S.C. § 1841 et seq.).

"Out-of-state bank holding company" means a bank holding company that has as its home state a state other than the Commonwealth.

"Subsidiary" means an entity over which another person has control. With respect to a bank, "subsidiary" means:

1. Any entity 25 percent or more of whose voting shares, excluding shares owned by the United States or by any company wholly owned by the United States, are directly or indirectly owned or controlled by such bank holding company, or held by it with power to vote;

2. Any company the election of a majority of whose directors is controlled in any manner by such bank holding company; or

3. Any company with respect to the management or policies of which such bank holding company has the power, directly or indirectly, to exercise a controlling influence, as determined by the Commission, after notice and opportunity for hearing.

"Virginia bank" means a bank that is organized under the laws of the Commonwealth or of the United States and that has the Commonwealth as its home state.

"Virginia bank holding company" means a bank holding company that has the Commonwealth as its home state and is not controlled by a bank holding company other than a Virginia bank holding company.

"Virginia financial institution" means a financial institution authorized to do business in the Commonwealth.

"Virginia financial institution holding company" means any person that has control over any financial institution authorized to do business in the Commonwealth or has control over a person that controls any such financial institution.

1978, c. 683, § 6.1-381; 1983, c. 194; 1985, c. 544, § 6.1-398; 1985, c. 604; 1986, c. 257; 1993, c. 58; 1994, cc. 315, 351; 1996, c. 16; 1998, c. 231; 2010, c. 794.

§ 6.2-701. Presumptions regarding control of entities, ownership of shares, and activities of subsidiaries or other entities.

A. A person shall be deemed to control another entity if:

1. It owns 25 percent or more of the voting shares of the entity;

2. The person is presumed to control the entity under the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), as amended, or under Section 10 of the Home Owners' Loan Act (12 U.S.C. § 1467a), as amended; or

3. A determination has been made by the Commission that the person exercises a controlling influence over the management and policies of the entity.

B. A financial institution holding company shall be deemed to own shares owned by a subsidiary.

C. A financial institution holding company shall be deemed to engage in activities engaged in by its subsidiary or by any other entity of which it owns five percent or more of the voting shares.

1978, c. 683, § 6.1-381; 1983, c. 194; 1985, c. 604; 1993, c. 58; 1996, c. 16; 2010, c. 794.

§ 6.2-702. Registration; authority to transact business.

Every person that controls one or more Virginia financial institutions (i) shall register with the Commission in accordance with procedures established by the Commission within 180 days after the date the person acquires control of a Virginia financial institution, unless the Commission allows additional time, and (ii) unless such person is a corporation chartered under the laws of Virginia, shall obtain a certificate of authority to transact business in the Commonwealth in accordance with § 13.1-757.

1978, c. 683, § 6.1-382; 1985, c. 544; 2010, c. 794.

§ 6.2-703. Acquisition of interest in entity other than financial institution by financial institutions.

No financial institution shall acquire more than five percent of the voting shares or otherwise gain control of any entity other than a financial institution without prior notice to the Commission.

1978, c. 683, § 6.1-383; 1983, cc. 193, 194; 2010, c. 794.

§ 6.2-704. Acquisition of interests in financial institutions and financial institution holding companies; application; notice; Commission approval required.

A. Except as provided in this chapter, no person shall acquire or make any public offer to acquire, directly or indirectly, control of a Virginia financial institution or a Virginia financial institution holding company, and no Virginia financial institution holding company shall acquire more than five percent of the voting shares of any Virginia financial institution or of any other Virginia financial institution holding company, unless it first shall:

1. File with the Commission an application in such form as the Commission may prescribe from time to time;

2. Deliver to the Commission such other information as the Commission may require with such certification of financial information and such verification by oath or affirmation of other data as the Commission may deem appropriate;

3. Pay such application fee as the Commission may prescribe from time to time; and

4. Except in the case of an entity that is a domestic corporation or a foreign corporation qualified to do business in the Commonwealth, deliver to the Commission a written consent to service of process in any action or suit arising out of or in connection with said proposed acquisition through service of process on the Secretary of the Commonwealth.

B. Upon receipt of an application, the Commission shall notify the affected Virginia financial institution or Virginia financial institution holding company, and shall solicit the views of the affected Virginia financial institution or Virginia financial institution holding company. The application and all other information required by the Commission under this section, except such additional information as the Commission determines should be kept confidential, shall be held as part of the public records and made available to the public.

C. An out-of-state bank holding company may acquire a Virginia bank holding company or a Virginia bank if: (i) the out-of-state bank holding company complies with the application requirements of subsection A and (ii) the Commission does not disapprove the application, after the investigation prescribed by § 6.2-705.

1983, c. 194, § 6.1-383.1; 1985, c. 544, § 6.1-399; 1985, c. 604; 1991, c. 282; 1994, c. 351; 1998, c. 231; 2010, c. 794.

§ 6.2-705. Investigation of application.

A. For 60 days following receipt of a complete application with the required information, fee, and consent as provided in subsection A of § 6.2-704, the Commission may conduct an investigation for the purpose of determining whether:

1. The proposed acquisition would be detrimental to the safety and soundness of the applicant or of the Virginia financial institution or Virginia financial institution holding company that the applicant seeks to control or the stock of which is to be acquired;

2. The applicant, its directors and officers, if applicable, and any proposed new directors and officers of the Virginia financial institution or Virginia financial institution holding company that the applicant seeks to control or the stock of which is to be acquired, are qualified by character, experience, and financial responsibility to control and operate a Virginia financial institution;

3. The proposed acquisition would be prejudicial to the interests of the depositors, creditors, beneficiaries of fiduciary accounts, or shareholders of the applicant or of the Virginia financial institution holding company or any Virginia financial institution that the applicant seeks to control or the stock of which is to be acquired; and

4. The acquisition is in the public interest.

B. The 60-day investigation period may be:

1. Shortened or waived by the Commission, as it deems appropriate, if the Commission finds that it must act immediately in order to prevent the probable failure of a Virginia financial institution involved; or

2. Extended only if the Commission determines that the applicant has not furnished all the information required by subsection A of § 6.2-704 or that the information submitted is substantially inaccurate or misleading.

C. Within the prescribed investigation period, and upon request of the applicant or the Virginia financial institution or Virginia financial institution holding company that the applicant seeks to control or the stock of which is to be acquired, the Commission may order a hearing concerning the proposed acquisition.

D. Within the prescribed investigation period, the Commission, by giving written notice of its decision and the reasons therefor to the applicant and to the Virginia financial institution or Virginia financial institution holding company that the applicant seeks to control or the stock of which is to be acquired, may (i) disapprove the application or (ii) impose such conditions on the acquisition as the Commission may deem advisable to effectuate the purposes of this chapter.

E. If the Commission (i) takes no action within the prescribed investigation period or (ii) issues notice within the prescribed investigation period of its intent not to disapprove the application, the acquisition may be completed by the applicant.

F. Any party in interest aggrieved by any decision of the Commission, as a matter of right, may appeal to the Supreme Court of Virginia in the manner provided by law.

G. The provisions of this section shall not apply:

1. To mergers or acquisitions of assets authorized by the Commission pursuant to the provisions of § 6.2-914;

2. If the acquisition or merger is arranged by the Commission or other supervisory authority in order to prevent the insolvency or closing of the institution; or

3. If a financial institution itself forms a corporation for the purpose of acquiring and holding the stock of such financial institution and it is proposed that the shareholders of the financial institution will become the shareholders of the financial institution holding company being organized. This exclusion shall apply regardless of the fact that some shareholders of the financial institution may dissent from the proposal.

1978, c. 683, § 6.1-387; 1983, c. 194, § 6.1-383.2; 1984, c. 335; 2010, c. 794.

§ 6.2-706. Cooperative agreements with other regulatory authorities.

Prior to approving the acquisition of any Virginia bank or Virginia bank holding company by any out-of-state bank holding company, or the acquisition of any out-of-state bank or out-of-state bank holding company by any Virginia bank holding company, the Commission shall enter into cooperative agreements with the appropriate regulatory authorities for the periodic examination of any out-of-state bank holding company that has a Virginia bank subsidiary, or any subsidiary of such holding company. The Commission may accept reports of examination and other records from such authorities in lieu of conducting its own examinations.

1985, c. 544, § 6.1-404; 1994, c. 351; 2010, c. 794.

§ 6.2-707. Reports and examinations.

The Commission may require any financial institution holding company that controls a Virginia financial institution to furnish such reports as it deems appropriate to the proper supervision of such holding companies. Unless the Commission determines otherwise, reports prepared for federal authorities may be submitted by such holding company in satisfaction of the requirements of this section. If, in the judgment of the Commission, such information and reports are inadequate for the Commission's intended purposes, the Commission may examine any such financial institution holding company and any subsidiary doing business in the Commonwealth.

1978, c. 683, § 6.1-384; 1983, c. 194; 2010, c. 794.

§ 6.2-708. Unsafe or unsound practices; cease and desist orders.

Upon finding that any activity of a financial institution holding company, including the control of an entity other than a Virginia financial institution, is or may be detrimental to the safety or soundness of a financial institution that is subject to regulation under the laws of the Commonwealth, the Commission, after reasonable notice to the financial institution holding company and an opportunity for it to be heard, shall have authority to order it to cease and desist from such activity.

1978, c. 683, § 6.1-385; 2010, c. 794.

§ 6.2-709. Conformity with federal forms.

To the maximum extent consistent with the effective discharge of the Commission's responsibilities, the forms prescribed by the Commission under this chapter for registration, reports, or any other forms shall conform with those established by regulation adopted pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.) or Section 10 of the Home Owners' Loan Act (12 U.S.C. § 1467a et seq.).

1978, c. 683, § 6.1-386; 2010, c. 794.

§ 6.2-710. Regulations excluding financial institution holding companies from this chapter.

The Commission may adopt regulations excluding financial institution holding companies from the provisions of this chapter, under conditions comparable to those provided in either the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.) or Section 10 of the Home Owners' Loan Act (12 U.S.C. § 1467a et seq.), when control of a Virginia financial institution arises (i) out of the acquisition of shares in a fiduciary capacity, (ii) in connection with an underwriting of securities or proxy solicitation, or (iii) in connection with securing or collecting a debt.

1978, c. 683, § 6.1-387; 1984, c. 335; 2010, c. 794.

§ 6.2-711. Civil penalties; injunction.

A. To the extent provided for therein, the Commission may impose a civil penalty of not less than $100 but not exceeding $1,000 per day for each day of noncompliance upon financial institution holding companies subject to the laws of the Commonwealth that fail to comply with any of the provisions of § 6.2-707 for a period of longer than 30 days, after being called upon by the Commission for a statement, or to do such other act as is therein provided. The Commission may impose a civil penalty of not less than $25 but not exceeding $100 per day for each day of noncompliance upon any officer of any such financial institution holding company, who shall refuse to give any examiner the information or refuse to be sworn, as required by this title.

B. The Commission (i) may impose a civil penalty not exceeding $10,000 against any financial institution holding company subject to the laws of the Commonwealth or against any of its directors, officers, or employees for violating any lawful order of the Commission and (ii) may remove from office any director or officer who a second time violates any such order. In all cases the defendant shall have an opportunity to be heard and to introduce evidence, and the right to appeal as provided by law.

C. Any person violating any provision of this chapter or any regulation adopted thereunder shall be subject to injunction by the Commission or by an appropriate court on motion of any party in interest. In addition, the Commission may impose a civil penalty of not more than $1,000 per day for each day the violation continues upon any person violating any provision of this chapter or any regulation adopted thereunder.

1978, c. 683, § 6.1-388; 1983, c. 194; 2010, c. 794.

§ 6.2-712. A savings institution holding company seeking to acquire a bank or bank holding company deemed a bank holding company.

For purposes of this chapter, any savings institution holding company seeking to acquire a bank or bank holding company, shall be deemed to be a bank holding company, for purposes of determining whether such savings institution holding company is permitted to acquire the bank or bank holding company in question.

1987, c. 634, § 6.1-399.1; 2010, c. 794.

§ 6.2-713. Applicable laws and regulations.

A. Any Virginia bank that is controlled by a bank holding company that is not a Virginia bank holding company shall be subject to all laws of the Commonwealth and all regulations under such laws that are applicable to Virginia banks controlled by Virginia bank holding companies.

B. The Commission shall adopt such regulations, including the imposition of reasonable application and administration fees, as it finds necessary to implement and effect the provisions of this chapter.

1985, c. 544, § 6.1-403; 2010, c. 794.

§ 6.2-714. Examinations of out-of-state bank holding companies and subsidiaries; reports; joint actions.

A. The Commission shall have the authority to examine any out-of-state bank holding company owning a Virginia bank and each of its Virginia or non-Virginia bank or nonbank subsidiaries.

B. The Commission shall require reports of each out-of-state bank holding company subject to this chapter. Such reports shall be filed under oath with such frequency and in such scope and detail as may be appropriate for the purpose of assuring continuing compliance with the provisions of this chapter.

C. The Commission may enter into joint actions with other regulatory authorities having concurrent jurisdiction over any out-of-state bank holding company that has a Virginia bank subsidiary or may take such actions independently to carry out its responsibilities under this chapter, assure the safety and soundness of any Virginia banks, and assure compliance with the provisions of this chapter and the applicable banking laws of the Commonwealth.

1985, c. 544, § 6.1-404; 1994, c. 351; 2010, c. 794.

§ 6.2-715. Notice of intent to acquire out-of-state bank.

A Virginia bank holding company or an out-of-state bank holding company that controls a Virginia bank shall file with the Commission (i) notice of its intention to acquire a bank outside Virginia and (ii) such information as the Commission shall request. The Commission shall within 30 days, or an extended period not exceeding 15 days, disapprove such acquisition if it determines that the acquisition could affect detrimentally the safety or soundness of a Virginia bank. It shall approve such acquisition within 45 days if it determines that the acquisition will not affect detrimentally the safety or soundness of such Virginia bank.

1985, c. 544, § 6.1-406; 1994, c. 351, 1996, c. 17; 2010, c. 794.

Chapter 8 - BANKS

Article 1 - General Provisions

§ 6.2-800. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Bank" means a corporation authorized by statute to accept deposits and to hold itself out to the public as engaged in the banking business in the Commonwealth.

"Bankers' bank" means a bank whose shares are owned exclusively by either (i) financial institutions that have or are eligible for insurance of deposits by a federal agency or (ii) financial institution holding companies as defined in § 6.2-700 or savings institution holding companies as defined in § 6.2-1100 owning any financial institution described in clause (i), provided that no such financial institution or holding company owns, directly or indirectly, more than five percent of the issued and outstanding voting shares of any bankers' bank.

"Bank holding company" means any corporation (i) that directly or indirectly owns, controls, or holds with power to vote, 25 percent or more of the voting shares of one or more banks or of a corporation that is or becomes a bank holding company by virtue of this definition, (ii) that controls in any manner the election of a majority of the directors of one or more banks, or (iii) for the benefit of whose shareholders or members 25 percent or more of the voting shares of one or more banks or bank holding companies is held by trustees. For the purpose of this definition, any successor to any such corporation shall be deemed to be a bank holding company from the date as of which such successor corporation becomes a bank holding company. Notwithstanding the foregoing, (a) a bank shall not be a bank holding company by virtue of its ownership or control of shares in a fiduciary capacity except where such shares are held for the benefit of the shareholders of such banks, (b) a corporation shall not be a bank holding company by virtue of its ownership or control of its shares acquired by it in connection with its underwriting of securities and which are held only for such period of time as will permit the sale thereof upon a reasonable basis, (c) a corporation formed for the sole purpose of participating in a proxy solicitation shall not be a bank holding company by virtue of its control of voting rights or shares acquired in the course of such solicitation, and (d) a corporation shall not be a bank holding company if at least 80 percent of its total assets are composed of holdings in the field of agriculture.

"Community and economic development entity" has the meaning assigned to it in 12 C.F.R. § 24.2.

"Community-based economic development" means activities that (i) seek to address economic development through affordable housing development or the rehabilitation of qualified rehabilitated buildings or certified historic structures or (ii) seek to address economic causes of poverty in specific geographic areas by revitalizing the economic and social base of low-income communities through activities that include (a) small business and micro-enterprise support; (b) commercial, industrial, and retail revitalization, retention, and expansion; (c) capacity development and technical assistance support for community development corporations; (d) employment and training efforts; (e) human resource development; and (f) social service enterprises.

"Community development corporation" means a private, nonprofit corporation whose board of directors is composed primarily of community representatives or business, civic, and community leaders and whose principal purpose includes the provision of housing, community-based economic development projects, and social services that primarily benefit low-income individuals and communities.

"Community development project" has the meaning assigned to it in 12 C.F.R. § 24.2.

"FDIC" means the Federal Deposit Insurance Corporation.

"International banking facility" means a set of assets and liability accounts segregated on the books and records of the bank, or an adjacent or other subsidiary that includes only international banking facility time deposits and international banking facility extensions of credit. The facility may either be located within Virginia or outside the territorial United States. "International banking facility" has the meaning assigned to it by the laws of the United States or the regulations of the Board of Governors for the Federal Reserve System.

"Public welfare investment" means any investment permitted by 12 C.F.R. § 24.3.

"Rural business investment company" means a company that has been granted final approval by the U.S. Secretary of Agriculture and has entered a participation agreement with the Secretary under 7 U.S.C. § 2009cc-3(e).

"State bank" means a bank incorporated under the laws of the Commonwealth and that has its principal place of business in the Commonwealth.

"Tax equity finance transaction" has the meaning assigned to it in 12 C.F.R. § 7.1025(b).

"Trust business" has the meaning assigned to it in § 6.2-1000.

"Trust company" has the meaning assigned to it in § 6.2-1000.

Code 1950, §§ 6-6, 6-27.1, 6-66; 1962, c. 404; 1966, c. 584, §§ 6.1-4, 6.1-80; 1974, c. 665; 1982, c. 411; 1983, c. 453, § 6.1-11.2; 1987, c. 556; 1989, cc. 376, 650, § 6.1-6.1; 1993, cc. 182, 432; 1994, c. 7; 1996, cc. 218, 306; 2006, c. 633; 2010, c. 794; 2023, cc. 543, 544.

§ 6.2-801. Application of chapter.

The provisions of this chapter shall apply to all state banks, and so far as constitutionally permissible, to all banks organized under the laws of the United States doing business in Virginia.

Code 1950, §§ 6-6, 6-27.1; 1962, c. 404; 1966, c. 584, § 6.1-4; 1974, c. 665; 1987, c. 556; 1993, c. 432; 2010, c. 794.

§ 6.2-802. Effect of chapter on certain banks.

A. Nothing in this chapter shall be construed to change or affect any privilege granted by charter to any bank incorporated before June 15, 1910, nor to affect the legality of any investment made or transaction had prior to June 18, 1928, pursuant to any provisions of law in force when such investment was made or transaction occurred.

B. No provision of this chapter other than § 6.2-803 shall apply to any bank chartered prior to June 15, 1910, under the laws of the Commonwealth but having no place of business within the Commonwealth and conducting its entire business outside of the Commonwealth.

Code 1950, § 6-8; 1966, c. 584, § 6.1-7; 2010, c. 794.

§ 6.2-803. Entities authorized to engage in banking business.

A. No person, except (i) corporations duly chartered and already conducting banking business in the Commonwealth under authority of the laws of the Commonwealth or the United States, (ii) corporations that shall hereafter be incorporated under, and authorized to conduct banking business in the Commonwealth under authority of, the laws of the Commonwealth, (iii) corporations that shall hereafter be authorized to do business in the Commonwealth under the banking laws of the United States, and (iv) banks authorized, after July 1, 1995, to establish and operate one or more branches in the Commonwealth under Article 6 (§ 6.2-836 et seq.) or Article 7 (§ 6.2-849 et seq.) of this chapter, shall engage in the banking business in the Commonwealth. No foreign corporation, except as permitted in Chapter 7 (§ 6.2-700 et seq.), shall engage in a banking business in the Commonwealth.

B. Nothing in this chapter shall prevent:

1. An individual from qualifying and acting as trustee, personal representative, guardian, conservator, committee or in any other fiduciary capacity;

2. Any person from (i) lending money on real estate and personal security or collateral, (ii) guaranteeing the payment of bonds, notes, bills and other obligations, or (iii) purchasing or selling stocks and bonds;

3. Any bank organized under the laws of the Commonwealth from qualifying and acting in another state as trustee, personal representative, guardian of a minor, conservator, or committee or in any other fiduciary capacity, when permitted so to do by the laws of such other state; or

4. An incorporated association that is authorized to sell burial association group life insurance certificates in the Commonwealth, as described in the definition of limited burial insurance authority in § 38.2-1800, the principal purpose of which is to assist its members in (i) financial planning for their funerals and burials and (ii) obtaining insurance for the payment, in whole or in part, for funeral, burial, and related expenses, from serving as trustee of a trust established pursuant to § 54.1-2822.

C. Nothing in this section shall be construed:

1. To prevent banks organized in the Commonwealth and chartered under the laws of the United States from transacting business in the Commonwealth; or

2. To prevent a real estate broker as defined in § 54.1-2100 from owning or operating a bank provided that the requirements of this chapter are met.

Code 1950, § 6-9; 1966, c. 584, § 6.1-5; 1985, c. 544; 1995, c. 301; 1997, c. 801; 1999, c. 835; 2003, cc. 536, 558, 910; 2007, c. 621; 2010, c. 794.

§ 6.2-804. Amendment of powers of state banks by regulation of the Commission.

A. In addition to the powers specifically granted to banks by the provisions of this chapter, the Commission may by regulation amend the powers of state banks so as to allow such state banks to engage in any activity in which a bank subject to the jurisdiction of the federal government may be authorized by federal legislation or regulation to engage.

B. The Commission, by regulation, may specify the activities that are permitted to be conducted at a location that is not authorized as a branch under § 6.2-831, in order to allow a state bank to engage in any activity in which a bank subject to the jurisdiction of the federal government may engage at a location other than a branch.

C. Regulations authorized by this section shall be adopted as provided in the Commission's Rules.

1968, c. 325, § 6.1-5.1; 1975, c. 81; 1987, c. 556; 1997, c. 111; 2010, c. 794.

§ 6.2-805. Commission authorized to confer on state banks power to make charges comparable to those permitted to national banking associations.

In addition to the permissible interest rates and charges that banks specifically, and lenders generally, are granted the power to charge by this title, the Commission may, by order, from time to time confer upon state banks the power to take, receive, reserve, and charge on any loan or discount made, at a rate of one per centum in excess of the discount rate on 90-day commercial paper in effect at the Federal Reserve Bank for the fifth Federal Reserve District. The Commission may thereby confer upon state banks the power to make charges that are comparable to those permitted under any federal statute or regulation to any national banking association.

1975, c. 80, § 6.1-5.2; 2010, c. 794.

§ 6.2-806. Saturday closing of banks.

Any bank, including national banking associations and federal reserve banks, may permit any one or more or all of its offices to remain closed on any one or more or all Saturdays, as the bank, by resolution of its board of directors, may from time to time determine. Any Saturday on which an office of a bank remains closed, as herein permitted, shall constitute a legal holiday as to such office. Any act authorized, required or permitted to be performed at, by or with respect to any such office on a Saturday on which the office is so closed may be performed on the next succeeding business day. No liability or loss of rights of any kind shall result from such delay.

Code 1950, § 2-20.1; 1952, c. 56; 1954, c. 273; 1956, cc. 38, 108, 366; 1958, c. 103; 1959, Ex. Sess., cc. 11, 65, 66; 1960, cc. 24, 588; 1962, c. 2; 1966, c. 677, § 2.1-23; 2001, c. 844, § 6.1-5.1; 2010, c. 794.

§ 6.2-807. Discoverability or admissibility of compliance review committee documents.

A. As used in this section, "compliance review committee" means a committee appointed by the board of directors of a bank for the purpose of evaluating and improving the bank's compliance with federal and state laws and adherence to its own established ethical and financial standards, and includes any other person when that person acts in an investigatory capacity at the direction of a compliance review committee.

B. Any records, reports, or other documents created by a compliance review committee are confidential and shall not be discoverable or admissible in evidence in any civil action unless, upon motion, the trial court determines in its discretion that there has been an abuse of the provisions of this section.

C. Any records, reports, or other documents produced by a compliance review committee and delivered to a federal or state governmental agency remain confidential and shall not be discoverable or admissible in evidence in any civil action, except to the extent that applicable law provides that such records, reports or other documents are not protected from disclosure.

D. In no event shall the existence of or any action by a compliance review committee serve as a basis or justification for delay of, or limit upon, the discovery process set forth in state or federal rules.

E. The work product created by any person acting in an investigatory capacity at the direction of a compliance review committee prior to his participation in the work of the compliance review committee or at the direction of the compliance review committee shall be subject to the rules governing discovery in accordance with the Rules of the Virginia Supreme Court.

F. This section shall not be construed to limit the discovery or admissibility:

1. In any civil action of any records, reports or other documents that are not created by a compliance review committee; or

2. Of any factual information which may be reviewed by a compliance review committee.

1994, c. 201, §§ 6.1-2.16, 6.1-2.17, 6.1-2.18; 2010, c. 794.

Article 2 - INCORPORATION AND POWERS

§ 6.2-808. Incorporation; corporate powers.

A. A bank may be incorporated under the Virginia Stock Corporation Act (§ 13.1-601 et seq.), but need not comply with the provisions of subsection A of § 13.1-630.

B. Except as otherwise provided in this chapter, a bank shall:

1. Have all the powers conferred on corporations, and be subject to all restrictions imposed on corporations, by the Virginia Stock Corporation Act;

2. Not issue its shares for any consideration except money at least equal in amount to the par value of its shares; and

3. Not issue no-par stock.

Code 1950, § 6-10; 1956, c. 433; 1966, c. 584, § 6.1-6; 1987, c. 556; 2010, c. 794.

§ 6.2-809. Bankers' banks.

A. A bank may be incorporated as provided in § 6.2-808 for the purpose of becoming a bankers' bank.

B. Except as specifically provided in this section or by regulation or order of the Commission, a bankers' bank shall be vested with all of the powers and subject to all of the restrictions imposed upon a bank.

C. Notwithstanding any other provision in this title to the contrary, a bankers' bank shall only accept deposits from or make loans to (i) a financial institution which has or is eligible for insurance of deposits by a federal agency, (ii) a bank in organization that has applied for insurance of deposits by a federal agency, (iii) a financial institution holding company as defined in § 6.2-700 or a savings institution holding company as defined in § 6.2-1100 owning an entity described in clause (i) or (ii), (iv) the officers, directors and employees of any such financial institution, bank in organization or holding company, (v) any person referred to a bankers' bank by a financial institution or by a bank in organization that has applied for insurance of deposits by a federal agency, or (vi), with the prior approval of the Commissioner and subject to such conditions as the Commissioner may impose, other persons.

D. A bankers' bank may form a bank holding company upon compliance with the provisions of Chapter 7 (§ 6.2-700 et seq.) and any applicable federal law.

E. A bankers' bank may purchase investments or securities of governments or private corporations which are traded on the open market such as are authorized to any other bank organized under the provisions of this chapter.

1989, c. 650, § 6.1-6.1; 1996, c. 218; 2006, c. 633; 2010, c. 794.

§ 6.2-810. Effect of chapter on charter powers.

The powers, privileges, duties and restrictions conferred and imposed upon any bank existing and doing business under the laws of the Commonwealth are abridged, enlarged or modified, as each particular case may require, to conform to the provisions of this chapter.

Code 1950, § 6-8; 1966, c. 584, § 6.1-7; 2010, c. 794.

§ 6.2-811. Membership in Federal Reserve Bank System or Federal Home Loan Bank System.

Any bank that has been or is hereafter incorporated under the laws of the Commonwealth, at its election, may become a member bank of the Federal Reserve Bank System, subject to the provisions of the Federal Reserve Act (P.L. 63-43, 38 Stat. 251) as it may be amended to permit a bank to become a member, or the Federal Home Loan Bank System, subject to the provisions of the Federal Home Loan Bank Act (P.L. 72-304, 47 Stat. 785) as it may be amended to permit a bank to become a member, or both. Upon becoming a member of either system, the bank shall be vested with all powers conferred upon state member banks of such systems by the terms of such acts. The powers shall be exercised subject to all restrictions and limitations imposed by the Federal Reserve Act or the Federal Home Loan Bank Act, or by regulations of the Federal Reserve Board or the Federal Housing Finance Board, respectively, adopted pursuant to such acts. The right is expressly reserved to revoke or amend the powers conferred pursuant to this section. The Commission may disclose to the Federal Reserve Board, or to examiners duly appointed by it, all information in reference to the affairs of any bank which has become, or desires to become a member of the system.

Code 1950, § 6-24; 1966, c. 584, § 6.1-8; 1993, c. 182; 2010, c. 794.

§ 6.2-812. Inspection of records, reports, and information of insured banks.

A. As used in this section, "insured bank" has the meaning assigned to it in § 12-B of the Federal Reserve Act (12 U.S.C. § 1813 (h)), as amended.

B. All records, reports, reports of examinations, and information relating to insured banks shall be open to the inspection of, and made available to, the officers and duly accredited agents of the Federal Deposit Insurance Corporation so long as like records, reports, and information in the possession or under the control of the Federal Deposit Insurance Corporation are, by federal statute, made available and subject to inspection by the Commission.

Code 1950, § 6-25; 1966, c. 584, § 6.1-9; 2010, c. 794.

§ 6.2-813. Participation by banks in school thrift or savings plans.

A bank may contract with the principal of any elementary or secondary school, if authorized to do so by the school board in any locality where the bank has a location, for the bank to participate in a school thrift or savings plan. A participating bank may accept deposits at the school either by its own collector or by any representative of the school who becomes the agent of the bank for such purpose.

Code 1950, § 6-23.1; 1954, c. 160; 1966, c. 584, § 6.1-10; 2010, c. 794.

§ 6.2-814. Powers of banks.

A. Every bank shall have power to exercise, by its board of directors or duly authorized officers or agents, subject to law, all incidental powers that are necessary to carry on the business of banking, by:

1. Discounting and negotiating bills of exchange, promissory notes, drafts, and other evidences of debt;

2. Receiving deposits;

3. Buying and selling exchange, coin, and bullion;

4. Loaning money on real property, personal property, security, or collateral;

5. Guaranteeing the payment of bonds, bills, notes and other obligations that have six months or fewer until maturity;

6. Rediscounting paper;

7. Purchasing and selling bonds;

8. Acting as agent in the sale of insurance and annuities;

9. Dealing in or making a market in securities;

10. Providing financial, investment, or economic advisory services;

11. Providing other products and services deemed by the Commission to be financial in nature;

12. Engaging directly in those activities in which a controlled subsidiary corporation of a bank is authorized to engage pursuant to §§ 6.2-885 and 6.2-888 in accordance with the requirements of such sections, provided that a bank, or a controlled subsidiary corporation of a bank, that transacts business as a real estate brokerage firm shall be subject to the provisions of § 6.2-888;

13. Establishing an international banking facility, either as a division of the bank or as a separate corporate entity under § 6.2-885; and

14. Utilizing armored vehicles or other vehicles to provide adequate protection for the funds transported for receipt of deposits of its customers or to deliver currency and coin.

B. In addition to the permissible business authorized by subsection A, the Commission may, upon the Commission's finding that an emergency exists, confer by order upon banks such temporary powers as the Commission may determine to be in the public interest. Such powers as are conferred may be (i) authorized for a limited period of time, (ii) granted selectively to fewer than all banks, and (iii) revoked by further order of the Commission.

Code 1950, § 6-23; 1966, c. 584, § 6.1-11; 1968, c. 727, § 6.1-41.1; 1978, c. 683, § 6.1-11.1, c. 453, § 6.1-11.2; 1987, c. 352; 2005, c. 320; 2010, c. 794.

§ 6.2-815. Suspension of business during emergency.

Every bank doing business in the Commonwealth is authorized temporarily to suspend its usual business during a period of actual or threatened enemy attack, civil insurrection or riot, affecting the community in which such institution is doing business or other emergency justifying temporary closing such as fire, flood, or hurricane.

Code 1950, § 6-30; 1966, c. 584, § 6.1-12; 1970, c. 15; 2010, c. 794.

§ 6.2-816. Banks to obtain certificate of authority.

A. Before any bank shall begin business it shall obtain from the Commission a certificate of authority authorizing it to do so. Prior to the issuance of such certificate, the Commission shall ascertain:

1. That all of the provisions of law have been complied with;

2. That financially responsible individuals have subscribed for capital stock and surplus in an amount deemed by the Commission to be sufficient to warrant successful operation. The amount of capital stock shall not be less than $2 million, except that the capital stock shall not be less than $500,000 for any trust company incorporated for the sole purpose of exercising fiduciary powers authorized by the provisions of Article 3 (§ 6.2-819 et seq.) of this chapter. The minimum capital stock requirement under this subdivision shall apply when a bank is being organized to begin business;

3. That oaths of all the directors have been taken and filed in accordance with the provisions of § 6.2-863;

4. That, in its opinion, the public interest will be served by banking facilities or additional banking facilities, as the case may be, in the community where the bank is proposed. The addition of such facilities shall be deemed in the public interest if, based on all relevant evidence and information, advantages such as, but not limited to, increased competition, additional convenience, or gains in efficiency outweigh possible adverse effects such as, but not limited to, diminished or unfair competition, undue concentration of resources, conflicts of interests, or unsafe or unsound practices;

5. That the corporation is formed for no other reason than a legitimate banking business;

6. That the moral fitness, financial responsibility, and business qualifications of individuals named as officers and directors of the proposed bank are sufficient to command the confidence of the community where the bank is proposed;

7. That the bank's deposits are to be insured by a federal agency up to the limits of the insurance provided thereby; and

8. Anything else deemed pertinent.

B. The minimum capital stock requirement specified in subdivision A 2 shall not apply when this section is referred to or used in connection with:

1. The conversion of an operating savings institution or national bank to a state bank;

2. The reorganization of an operating bank under a holding company;

3. The issuance of a certificate of authority to a holding company to facilitate its merger with and into its subsidiary bank;

4. The issuance of a certificate of authority to a holding company to facilitate the merger of its subsidiary bank with and into the holding company;

5. The issuance of a certificate of authority to a holding company to facilitate the merger of both the holding company and its subsidiary bank with and into a newly formed entity; or

6. The issuance of a certificate of authority to a resulting bank following a merger described in subdivision B 3, B 4, or B 5, provided that such merger does not result in or involve a change of control as defined in § 6.2-701.

Code 1950, § 6-31; 1966, c. 584, § 6.1-13; 1973, c. 454; 1976, c. 658; 1979, c. 57; 1983, c. 193; 1989, c. 751; 1989, Sp. Sess., cc. 4, 7; 1992, c. 460; 1996, c. 26; 1998, c. 18; 2010, c. 794; 2014, cc. 221, 372.

§ 6.2-817. Capital stock subscriptions.

A. Subscriptions to the capital stock of a bank shall be paid in money at not less than par. No bank shall begin business until the amounts specified in its certificate of authority to commence business have been received by the bank.

B. All money received for subscriptions to or for purchases of stock of a bank before it opens for business shall be deposited in an escrow account in an insured financial institution or invested in United States government obligations, under the joint control of two organizing directors of the bank. Such funds, together with any income thereon, shall be remitted to the bank on the day it opens for business. If the bank is denied a certificate of authority or is refused insurance of accounts, or it otherwise is determined that the bank will not open for business, such funds, after payment of any amount owing for expenses in connection with such attempted organization, including reasonable consulting fees, attorney fees, salaries, filing fees, and other expenses, shall be refunded to subscribers or shareholders.

C. The requirement that capital stock be paid in money shall not be construed to prohibit the establishment, as otherwise authorized by law, of stock option plans, stock purchase plans, and restricted stock award plans, and the issuance of stock pursuant to such plans. Such plans shall be established only after the bank has opened for business, and shall be approved by a majority vote of the bank's shareholders. In no event shall any stock option be granted at a price which is less than 100 percent of the fair market value per share of the stock.

Code 1950, § 6-34; 1964, c. 58; 1966, c. 584, § 6.1-14; 1980, c. 659; 2010, c. 794; 2011, c. 240; 2019, cc. 253, 254.

§ 6.2-818. Repealed.

Repealed by Acts 2019, cc. 253 and 254, cl. 2, effective July 1, 2019.

§ 6.2-818.1. Virtual currency custody services by banks.

A. As used in this section, unless the context requires a different meaning:

"Bank" has the same meaning as provided in § 6.2-800.

"Custody services" means the role of a bank in the safekeeping and custody of various customer assets.

"Self-assessment" has the same meaning as provided in § 6.2-947.

"Virtual currency" means an electronic representation of value intended to be used as a medium of exchange, unit of account, or store of value. "Virtual currency" does not exist in a physical form; it is intangible and exists only on the blockchain or distributed ledger associated with a particular virtual currency. The owner of virtual currency holds cryptographic keys associated with the specific unit of virtual currency in a digital wallet, which allows the rightful owner of the virtual currency to access and utilize it.

B. A bank may provide its customers with virtual currency custody services so long as the bank has adequate protocols in place to effectively manage risks and comply with applicable laws. Prior to a bank offering virtual currency custody services, the bank shall carefully examine the risks involved in offering such services through a methodical self-assessment process. If the bank decides to move forward with offering such services, the bank shall:

1. Implement effective risk management systems and controls to measure, monitor, and control relevant risks associated with custody of digital assets such as virtual currency;

2. Confirm that it has adequate insurance coverage for such services; and

3. Maintain a service provider oversight program, to the extent that the bank engages with a service provider to provide virtual currency custody services, to address risks to service provider relationships as a result of engaging in virtual currency custody services.

C. A bank may provide virtual currency custody services in either a nonfiduciary or fiduciary capacity.

In providing such services in a nonfiduciary capacity, the bank shall act as a bailee, taking possession of the customer's asset for safekeeping while legal title remains with the customer, meaning that the customer retains direct control over the keys associated with their virtual currency.

In providing such services in a fiduciary capacity, a bank is required to possess trust powers as described in § 6.2-819 and have a trust department pursuant to § 6.2-821. Acting in a fiduciary capacity, the bank shall require customers to transfer their virtual currencies to the control of the bank by creating new private keys to be held by the bank. In its fiduciary capacity, a bank shall have authority to manage virtual currency assets as it would any other type of asset held in such capacity.

2022, c. 623.

Article 3 - CONDUCT OF TRUST BUSINESS BY BANKS

§ 6.2-819. Authority to engage in trust business; permission of Commission required.

A. A bank shall not engage in the trust business unless its articles of incorporation state that one of its purposes is to engage in the trust business.

B. A bank shall not commence to engage in the trust business without first obtaining permission from the Commission. The Commission shall not grant such permission unless it finds that:

1. The bank's capital structure is sufficiently strong to support such additional undertaking;

2. The personnel who will direct the proposed trust department have adequate experience and training, and will devote sufficient time to its affairs to insure compliance with the law and to protect the bank against surcharge; and

3. The granting of trust powers to the bank will be in the public interest.

C. Notwithstanding the provisions of subsection B, any bank actively engaged in the trust business on January 1, 1966, may continue in the trust business without the Commission's permission.

D. A bank authorized to do a trust business shall conduct such business in accordance with the applicable provisions of Chapter 10 (§ 6.2-1000 et seq.).

Code 1950, § 6-91; 1958, c. 139; 1966, c. 584, § 6.1-16; 1976, c. 658; 2010, c. 794.

§ 6.2-820. Powers of national banks as fiduciaries.

All national banks that have been, or hereafter may be, permitted by law to act as trustee and in other fiduciary capacities, shall have the rights, powers, privileges, and immunities conferred upon trust companies by Chapter 10 (§ 6.2-1000 et seq.).

Code 1950, §§ 6-94, 6-104; 1966, c. 584, § 6.1-17; 1984, c. 172; 1993, c. 432; 1997, c. 801; 2010, c. 794.

§ 6.2-821. Separation of banking and trust functions; establishment of trust department.

Every state bank that obtains permission from the Commission to engage in trust business shall establish a separate trust department. Such department shall be established before such institution undertakes to act in any fiduciary capacity and shall be placed under the management of an officer or officers whose duties shall be prescribed by the board of directors of the institution or by either an amendment to the bylaws of the institution or by a resolution duly entered in the minutes of the board of directors.

Code 1950, § 6-97; 1966, c. 584, § 6.1-20; 1993, c. 432; 2010, c. 794.

Article 4 - BANK MERGERS AND CONVERSIONS

§ 6.2-822. Merger and share exchange by state banks.

A. Virginia banks as defined in § 6.2-849 may merge upon compliance with the provisions of Article 12 (§ 13.1-715.1 et seq.) of the Virginia Stock Corporation Act. The provisions of:

1. Section 13.1-716 that relate to a merger with a foreign corporation as foreign eligible entity shall not apply, except that the provisions of § 13.1-716 relating to merger shall apply to the merger of a state and a national bank if the national bank is engaged in business in Virginia, and if the state bank is to be the surviving bank; and

2. Section 13.1-730 shall not apply to a merger under this section.

B. A national bank shall be treated as if it were a foreign corporation and as if the United States were the state where it is organized. A bank may enter into a share exchange, as permitted by § 13.1-717, provided there is also compliance with Chapter 7 (§ 6.2-700 et seq.). The exclusion in subdivision G 3 of § 6.2-705 shall not apply in the case of such an exchange of shares.

C. In the event of a merger authorized by subsection A or B, the merged corporation, whether it be one of merging banks, or a new bank formed by means of such merger, shall without further act or deed succeed to, and be vested with all offices, rights, obligations and relations of trust or of a fiduciary nature, including appointments, designations and nominations, existing immediately prior to the time at which such merger became effective, or then belonging or pertaining to any one or more of the banks, parties to such merger, or which would then inure to any one or more of such banks.

D. No state bank resulting from any merger shall do business in the Commonwealth until it shall have obtained from the Commission a certificate of authority authorizing it to do so. The provisions of § 6.2-816 shall apply to the issuance, or refusal of the Commission to issue, the certificate herein provided for, to the same extent as if the merged bank were a new bank.

E. In the case of a merger heretofore or hereafter effected, the surviving or new bank shall be deemed to have been in actual operation for the period during which the oldest of the banks involved in the merger has been in actual operation.

Code 1950, §§ 6-20, 6-21; 1952, c. 571; 1956, c. 433; 1966, c. 584, §§ 6.1-43, 6.1-44; 1970, c. 536; 1987, c. 423; 1995, c. 301; 2005, c. 765; 2010, c. 794.

§ 6.2-823. Conversion of national banking association to state bank; certificate of authority.

A. A national banking association, organized under the laws of the United States and doing business in the Commonwealth, may be converted into and become a state bank by the following procedure:

1. The directors of the national banking association shall cause to be incorporated under the laws of the Commonwealth a corporation authorized by its certificate of incorporation to conduct the business of banking as the successor of the national banking association. With regard to such incorporation:

a. The certificate of incorporation of the corporation shall conform as nearly as may be legally permissible to that of the national banking association;

b. The principal office of the corporation shall be in the county or city wherein the national banking association has its principal office; and

c. The amount of the capital stock of the corporation, its division into shares, the par value of shares, their classification and preferences, if any, shall conform to those of the national banking association, and the minimum capital of the state bank shall comply with that required for a bank under § 6.2-816.

2. The national banking association shall effect its conversion to a state bank in accordance with the procedure prescribed by Subchapter XV of Chapter 2 of Title 12 of the United States Code (12 U.S.C. § 214 et seq.), as it now exists or as it may hereafter be amended.

3. Upon completion of the procedures required by subdivision 2, the president of the national banking association and the official having custody of its records shall execute, under the seal of the association, a certificate showing in detail the procedures followed, the number of shares of each class of stock of the national banking association issued and outstanding, and the vote of each class of stockholders in favor of the plan of conversion. The national banking association shall then file the certificate with the Commission.

B. The Commission shall examine the certificate filed pursuant to subdivision A 3. If from such examination it appears that the procedure required by subdivision A 2 has been followed and that the conversion has been approved by the stockholders of the national banking association in the manner and by the percentage vote required by federal law, the Commission may issue to the newly incorporated state bank a certificate of authority to do business as a bank, in accordance with the provisions of § 6.2-816. Upon the issue of such certificate, the conversion of the national banking association into a state bank shall become effective and be automatically completed.

Code 1950, §§ 6-14, 6-15.1; 1952, c. 571; 1966, c. 584, §§ 6.1-33, 6.1-38; 1993, c. 244; 1996, c. 26; 2010, c. 794.

§ 6.2-824. Status of converted bank.

Upon the conversion of a national banking association to a state bank as provided in § 6.2-823, the state bank shall be considered to be the same business and corporate entity as the former national banking association, except that the state bank shall have the rights, powers, and duties as prescribed by state law. Any reference to the former national banking association in any contract, will, or document shall be deemed to be a reference to the state bank if not inconsistent with the provisions of the contract, will, or document or with applicable law.

Code 1950, § 6-15.2; 1952, c. 571; 1966, c. 584, § 6.1-34; 2010, c. 794.

§ 6.2-825. State bank becoming national bank; notice required; effect on liabilities.

A. Any bank incorporated under the laws of the Commonwealth may, upon compliance with federal law, be converted into a national banking association.

B. When any state bank becomes a corporation for carrying on the business of banking under federal law, it shall notify the Commission of such fact and file with the Commission a copy of its authorization as a national banking association certified by the Comptroller of the Currency. Such bank shall thereupon cease to be a corporation under the laws of the Commonwealth, except that, for a period not exceeding three years thereafter, its corporate existence shall be deemed to continue for the purposes of (i) prosecuting or defending suits by or against it and (ii) enabling it to settle and close its affairs, to dispose of and convey its property, and to divide its capital, but not for the purpose of continuing the business for which such bank was established.

C. A conversion from a state to a national bank shall not release the state bank from its obligations to pay and discharge (i) all the liabilities created by law or incurred by it before becoming a national banking association, (ii) any tax imposed by the laws of the Commonwealth up to the date of its becoming such national banking association in proportion to the time which has elapsed since the next preceding payment therefor, or (iii) any assessment, penalty, or forfeiture imposed or incurred under the laws of the Commonwealth up to the date it became a national banking association.

Code 1950, § 6-18; 1966, c. 584, § 6.1-35; 2010, c. 794.

§ 6.2-826. Effect of conversion of state bank to national bank.

A. When a conversion of a state bank into a national banking association under the authority granted by § 6.2-825 becomes effective, all the property of the former state bank, including all its right, title, and interest in and to all property of every kind, whether real, personal, or mixed, and things in action, and every right, privilege, interest, and asset of any conceivable value or benefit then existing, belonging, or pertaining to it, or which would inure to it, shall immediately, by act of law and without any conveyance or transfer, and without any further act or deed, be vested in and become the property of such national bank. The national bank shall have, hold, and enjoy the same in its own right as fully and to the same extent as if the same were possessed, held, or enjoyed by the state bank. The national bank shall be deemed to be a continuation of the entity and identity of the state banking corporation that is operated under and pursuant to federal law.

B. All the rights, obligations, and relations of the converted state bank to or in respect to (i) any person, estate, creditor, depositor, trustee, or beneficiary of any trust and (ii) any executorship or trusteeship or other trust or fiduciary function, including appointments, designations, and nominations, shall remain unimpaired. The national bank, as of the beginning of its corporate existence, shall, by operation of this section, succeed to all such rights, obligations, relations, and trusts, including appointments, designations, and nominations, and the duties and liabilities connected therewith. The national bank shall execute and perform each and every such trust and relation in the same manner as if such national bank had itself assumed the trust or relation, including the obligations and liabilities connected therewith.

C. If the state banking corporation is acting as administrator, coadministrator, executor, coexecutor, trustee, or cotrustee of, or in respect to, any estate or trust being administered under the laws of the Commonwealth, such relation, as well as any other or similar fiduciary relation, and all rights, privileges, duties, and obligations connected therewith, shall remain unimpaired and shall continue in such national bank from and as of the beginning of its corporate existence, irrespective of (i) the date when any such relation may have been created or established, (ii) the date of any trust agreement relating thereto, or (iii) the date of the death of any testator or decedent whose estate is being so administered.

D. Nothing done in connection with a conversion from a state to a national bank, in respect to any such executorship, trusteeship, or similar fiduciary relation, shall (i) be deemed to be or to effect, under the laws of the Commonwealth, a renunciation or revocation of any letters of administration or letters testamentary pertaining to such relation or a removal or resignation from any such executorship or trusteeship or (ii) be deemed to be of the same effect as if the executor or trustee had died or otherwise become incompetent to act. Nothing in this section shall in any way affect any provisions of law if a national bank becomes a state bank.

Code 1950, § 6-19; 1966, c. 584, § 6.1-36; 2010, c. 794.

§ 6.2-827. Rights of national bank stockholders dissenting from conversion.

The rights of stockholders of a national banking association who dissent from the approval by the stockholders of the conversion of the national banking corporation into a state bank shall be governed by the provisions of 12 U.S.C. § 214a (b), as now existing or as hereafter amended.

Code 1950, § 6-15.3; 1952, c. 571; 1966, c. 584, § 6.1-37; 2010, c. 794.

§ 6.2-828. Conversion of state bank to federal savings institution.

A. A state bank may convert into a federal savings institution as follows:

1. At any meeting of the stockholders called and held in accordance with the Virginia Stock Corporation Act (§ 13.1-601 et seq.) or the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) to consider such action, the stockholders, by an affirmative vote of those holding and voting two-thirds of the votes present in person or by proxy, may resolve to convert the bank into a federal savings institution;

2. A copy of the minutes of the meeting duly certified by the president or vice-president and the secretary or assistant secretary of the state bank shall be transmitted to the Commission;

3. Thereafter, the state bank shall take such action as is necessary under federal law to make it a federal savings institution; and

4. The bank shall file with the Commission a certified copy of the charter issued to it by the federal chartering authority, or a certificate of that authority showing the organization of the bank as a federal savings institution.

B. Upon the filing of the certified copy of a charter or certificate of authority as provided in subdivision A 4, the bank shall cease to be a state bank.

C. No state bank shall convert into a federal savings institution until it has been in operation as a state bank for a period of at least five years.

D. When a conversion of a state bank into federal savings institution becomes effective, the state bank shall cease to be a Virginia corporation and all its property, by operation of law and without any further act or deed, shall continue to be vested in it under its new name as a federal savings institution and under its federal charter. The federal savings institution shall have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by it as a state bank. The federal savings institution, at the time of the taking effect of the conversion, shall become and continue to be responsible for all of the obligations of the state bank including taxes and other liabilities created by law or incurred by it before becoming a federal savings institution to the same extent as though the conversion had not taken place.

Code 1950, §§ 6-201.43; 6-201.44; 1960, c. 402; 1966, c. 584, §§ 6.1-173, 6.1-174; 1972, c. 796, §§ 6.1-195.52, 6.1-195.53; 1982, c. 156; 1985, c. 425; 1990, c. 3; 1995, c. 133; 2010, c. 794.

§ 6.2-829. Conversion from state savings bank to state bank; conversion from state bank to state savings bank.

A. A state savings bank may be converted into a state bank upon compliance with the procedure set forth in subsection A of § 6.2-1144.

B. A state bank may be converted into a state savings bank by the amendment of its articles of incorporation in compliance with the procedure established by Title 13.1, provided that such conversion is approved in advance by the Commission. Prior to approving or disapproving a conversion, the Commission shall investigate the application to convert as if it were an application for a certificate of authority to begin a savings bank, and approval shall not be granted unless the applicant meets the standards established by § 6.2-1118. Within one year of the date of the conversion, the resulting state savings bank shall conform its assets and operations to the provisions of law regulating the operation of state savings banks. The Commission may grant such resulting state savings bank additional one-year periods, not to exceed a total of four additional years, in which to conform its assets and operations to the provisions of law regulating the operation of state savings banks.

1991, c. 230, § 6.1-194.129; 2010, c. 794.

§ 6.2-830. Conversion from stock association to bank; conversion from bank to stock association.

A. A state stock association may be converted into a bank upon compliance with the procedure set forth in § 6.2-1144.

B. A bank may be converted into a stock association by the amendment of its articles of incorporation in compliance with the procedure established by Title 13.1, provided that such conversion is approved in advance by the Commission. Prior to approving or disapproving a conversion, the Commission shall investigate the application to convert as if it was an application for a certificate of authority to begin a savings and loan business, and approval shall not be granted unless the applicant meets the standards established by § 6.2-1118. Within one year of the date of the conversion, the resulting stock association shall conform its assets and operations to the provisions of law regulating the operation of savings and loan associations. The Commission may grant such resulting stock association additional one-year periods, not to exceed a total of four additional years, in which to conform its assets and operations to the provisions of law regulating the operation of savings and loan associations.

1982, c. 224, § 6.1-195.57:2; 1985, c. 425, § 6.1-194.38; 2010, c. 794.

Article 5 - BRANCHES AND FACILITIES

§ 6.2-831. Establishment of branch banks; redesignation of main office.

A. A bank may establish and operate one or more branch offices, and a bank may relocate a main or branch office, provided the bank applies to the Commission for authority to establish or relocate any such office. Applications shall be made in writing on a form prescribed by the Commission and shall be accompanied by the fee established pursuant to § 6.2-908. As used in this section, "branch office" does not include any automated teller machine, cash-dispensing machine, or similar electronic or computer terminal, regardless of whether it (i) is located on bank premises or premises properly considered part of an authorized office of the bank or (ii) receives or records deposits, disburses loan proceeds, or provides for electronic fund transfers.

B. The Commission shall have 30 days from the date it receives a complete application in which to review a branch proposal or a proposed relocation. The review period may be extended for an additional 30 days. The Commission may deny such an application if the Commission finds that a proposal would have a detrimental effect on the applicant bank's safety and soundness or that it is otherwise not in the public interest. A branch office that has been denied shall not be established and a relocation that has been denied shall not be carried out. If the Commission does not issue a denial of a branch proposal or a proposed relocation within 30 days, or 60 days if the review period is extended, the proposed branch office or offices, or the proposed relocation, shall be authorized, and the branch or branches may be established and operated, or the relocation may be completed.

C. The office at which a bank begins business shall be designated initially as its main office. Thereafter, the board of directors may redesignate as the main office any authorized office of the bank in the Commonwealth. The bank shall notify the Commission of any such redesignation not later than 30 days before its effective date and confirm the redesignation to the Commission within 10 days of its occurrence.

D. A bank shall be subject to the prohibition in § 6.2-842 against establishing or maintaining a branch in the Commonwealth on the premises or property of an affiliate if the affiliate engages in commercial activities.

E. The Commission may impose a civil penalty not exceeding $2,000 upon any bank that it determines, in proceedings commenced in accordance with the Commission's Rules, has violated the provisions of this section.

Code 1950, § 6-29; 1966, c. 584, § 6.1-113; 1986, c. 505, § 6.1-39.3; 1987, cc. 352, 556; 1991, c. 322; 1992, c. 136; 1994, c. 7; 1996, c. 26; 1999, c. 545; 2007, c. 1; 2010, c. 794; 2015, cc. 19, 445.

§ 6.2-832. Establishment of automated teller machines and electronic terminals.

A. No application to, or approval from, the Commission shall be required for a bank to establish or operate an automated teller machine, cash-dispensing machine, or similar electronic or computer terminal, regardless of whether it (i) is located on bank premises or premises properly considered part of an authorized office of the bank or (ii) receives or records deposits, disburses loan proceeds, or provides for electronic fund transfers.

B. A Virginia state bank, as defined in § 6.2-836, may establish and operate such automated teller machines, cash-dispensing machines, or similar electronic or computer terminals in the Commonwealth, provided the bank complies with all Commonwealth and federal laws and regulations applicable to such machines and terminals. An out-of-state bank, as defined in § 6.2-836, may establish and operate such automated teller machines, cash-dispensing machines, or similar electronic or computer terminals in the Commonwealth, provided the bank complies with all Commonwealth, home state and federal laws applicable to such machines and terminals.

C. The Commission may adopt regulations affecting electronic fund transfers by banks if it finds such regulations necessary for the protection of the public interest.

1997, c. 141, § 6.1-39.4:1; 2010, c. 794; 2015, cc. 19, 445.

§ 6.2-833. Bank agent for depository institution.

A bank may act as the agent of any other depository institution in receiving deposits and providing other services without being deemed a branch of such other depository institution.

1995, c. 301, § 6.1-39.5; 1997, c. 24; 2010, c. 794.

§ 6.2-834. Operation of branch office under different name; civil penalty.

A. No branch office shall be operated or advertised under any other name than that of the identical name of the bank, unless (i) permission is first obtained from the Commission and (ii) the different name shall contain or have added thereto language clearly indicating that it is a branch office of the bank or a division of the bank.

B. The Commission may impose a civil penalty not exceeding $2,000 upon any bank that it determines, in proceedings commenced in accordance with the Commission's Rules, has violated the provisions of this section.

Code 1950, §§ 6-28, 6-29; 1966, c. 584, §§ 6.1-41, 6.1-113; 1979, c. 59; 1987, c. 556; 1992, c. 136; 1994, c. 7; 2010, c. 794; 2018, cc. 130, 266.

§ 6.2-835. Banking facilities in certain hospitals or federal areas.

A. The Commission, when in its discretion banking facilities are required (i) for patients in, students at, or employees of hospitals operated by the U.S. Department of Veterans Affairs or by the Commonwealth or (ii) for members of the armed forces at any military or naval federal area in the Commonwealth, may permit any bank that is authorized to do business in the Commonwealth to establish and operate such banking facilities as are required in any such hospital or federal area.

B. The banking facilities so established shall be operated in accordance with the laws of the Commonwealth relating thereto. The Commission may permit only certain specified services to be established and operated.

Code 1950, § 6-29.1; 1952, c. 75; 1956, c. 45; 1966, c. 584, § 6.1-42; 2010, c. 794.

Article 6 - INTERSTATE BRANCHING

§ 6.2-836. Definitions.

As used in this article, unless a different meaning is required:

"Acquisition of a branch" means the acquisition of a branch located in a host state, without acquiring the bank of such branch.

"Affiliate" has the meaning assigned to it in 12 U.S.C. § 1841 (k) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), as amended.

"Bank" has the meaning assigned to it in 12 U.S.C. § 1813 (a) (1) of the Federal Deposit Insurance Company Act of 1956 (12 U.S.C. § 1811 et seq.), as amended.

"Bank holding company" has the meaning assigned to it in 12 U.S.C. § 1841 (a) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), as amended.

"Commercial activities" means activities in which a bank holding company, a financial holding company, a national bank, or a national bank financial subsidiary may not engage under federal law.

"De novo branch" means a branch of a bank located in a host state which (i) is originally established by the bank as a branch and (ii) does not become a branch of the bank as a result of the acquisition of another bank or a branch of another bank, or the merger, consolidation, or conversion of any such bank or branch.

"Financial holding company" has the meaning assigned to it in 12 U.S.C. § 1841 (p) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), as amended.

"Home state" means:

1. With respect to a national bank, the state in which the main office of the bank is located;

2. With respect to a state bank, the state by which the bank is chartered;

3. With respect to a foreign bank, the state determined to be the home state of such foreign bank under 12 U.S.C. § 3103 (c).

"Host state" means a state, other than the home state of a bank, in which the bank maintains, or seeks to establish and maintain, a branch.

"Out-of-state bank" means a bank whose home state is a state other than the Commonwealth.

"Out-of-state state bank" means a bank chartered under the laws of any state other than the Commonwealth.

"Virginia state bank" means a bank chartered under the laws of Virginia.

1995, c. 301, § 6.1-44.2; 2007, c. 1; 2010, c. 794.

§ 6.2-837. Interstate branching by Virginia state banks.

A. With the prior approval of the Commission, any Virginia state bank may establish and maintain a de novo branch or acquire a branch in a state other than the Commonwealth.

B. A Virginia state bank desiring to establish and maintain a branch in another state under this section shall file an application on a form prescribed by the Commission and pay the branch application fee set forth in § 6.2-908. If the Commission finds that the applicant has the financial resources sufficient to undertake the proposed expansion without adversely affecting its soundness and that the laws of the host state permit the establishment of the branch, it may approve the application. The bank may establish the branch when it has received the written approval of the Commission.

1995, c. 301, § 6.1-44.3; 2010, c. 794; 2014, c. 200.

§ 6.2-838. Interstate branching.

An out-of-state bank that does not already maintain a branch in the Commonwealth and that meets the requirements of this article may establish and maintain a de novo branch in the Commonwealth.

1995, c. 301, § 6.1-44.4; 2010, c. 794.

§ 6.2-839. Interstate branching through the acquisition of a branch.

An out-of-state bank that does not already maintain a branch in the Commonwealth and that meets the requirements of this article may establish and maintain a branch in the Commonwealth through the acquisition of a branch.

1995, c. 301, § 6.1-44.45; 2010, c. 794.

§ 6.2-840. Filing requirements.

An out-of-state bank desiring to establish and maintain a de novo branch or to acquire a branch in the Commonwealth shall submit to the Commission a copy of the application it files with its home state supervisor or the responsible federal banking agency to establish or acquire such branch. Such submission shall be made at the same time the application is filed by the out-of-state bank with such home state supervisor or responsible federal banking agency. The out-of-state bank shall also comply with the requirements of Article 17 (§ 13.1-757 et seq.) of the Virginia Stock Corporation Act and pay any filing fee required by the Commission.

1995, c. 301, § 6.1-44.6; 2010, c. 794.

§ 6.2-841. Repealed.

Repealed by Acts 2014, c. 200, cl. 2.

§ 6.2-842. Powers.

A. An out-of-state state bank that establishes and maintains one or more branches in the Commonwealth under this article may conduct the same activities at such branch or branches that are authorized under Virginia law for Virginia state banks, except to the extent such activities may be prohibited by other laws, regulations, or orders applicable to the out-of-state state bank.

B. A Virginia state bank may conduct the same activities at a branch outside the Commonwealth that are permissible for a bank chartered by the host state where the branch is located, except to the extent such activities are expressly prohibited by other laws, regulations, or orders applicable to the Virginia state bank.

C. A bank shall not establish or maintain a branch in the Commonwealth on the premises or property of an affiliate if the affiliate engages in commercial activities.

1995, c. 301, § 6.1-44.8; 2007, c. 1; 2010, c. 794.

§ 6.2-843. Examination; periodic reports; cooperative agreements; assessment of fees.

A. The Commission may make such examinations of any branch established under this article by an out-of-state state bank as the Commission may deem necessary to determine whether the branch is operating in compliance with the laws of the Commonwealth and to ensure that the branch is being operated in a safe and sound manner. The provisions of § 6.2-901 shall apply to such examinations.

B. The Commission may require periodic reports from any out-of-state bank that maintains a branch in the Commonwealth to the extent such reporting requirements (i) apply equally to similarly situated banks having the Commonwealth as their home state and (ii) are not preempted by federal law. Such reports shall be filed under oath with such frequency and in such scope and detail as may be appropriate for the purpose of assuring continuing compliance with the provisions of this article.

C. The Commission may enter into cooperative agreements with the appropriate state bank supervisors and federal banking agencies for the periodic examination of any branch in the Commonwealth of an out-of-state state bank, or any branch of a Virginia state bank in any host state, and may accept such agencies' reports of examination and reports of investigation in lieu of conducting its own examinations or investigations. The Commission may enter into joint enforcement actions with other state bank supervisors and federal banking agencies having concurrent jurisdiction over any branch of an out-of-state state bank or any branch of a Virginia state bank, or may take such actions independently to carry out its responsibilities under this article and to assure compliance with the laws of the Commonwealth.

D. Out-of-state state banks may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of the Commonwealth and regulations of the Commission. Such fees may be shared with other state and federal regulators in accordance with agreements between them and the Commission.

1995, c. 301, § 6.1-44.9; 2010, c. 794.

§ 6.2-844. Enforcement.

If the Commission determines that there is any violation of any law of the Commonwealth in the operation of a branch of an out-of-state state bank, or that such branch is being operated in an unsafe and unsound manner, the Commission shall have the authority to undertake such enforcement actions as it would be permitted to take if the branch were a Virginia state bank.

1995, c. 301, § 6.1-44.10; 2010, c. 794.

§ 6.2-845. Additional branches.

An out-of-state bank that has established or acquired a branch in the Commonwealth under this article may establish or acquire additional branches in the Commonwealth to the same extent that any bank, whose home state is the Commonwealth, may establish or acquire a branch in the Commonwealth under applicable federal and state law.

1995, c. 301, § 6.1-44.11; 2010, c. 794.

§ 6.2-846. Regulations; fees.

The Commission may adopt such regulations and may provide for the payment of such reasonable application and administration fees as it finds necessary and appropriate in order to implement the provisions of this article.

1995, c. 301, § 6.1-44.12; 2010, c. 794.

§ 6.2-847. Notice of subsequent merger or other transaction.

An out-of-state state bank that maintains a branch in the Commonwealth under this article shall give 30 days' prior written notice of any merger, consolidation, or other transaction involving the bank which would cause the Virginia branch to be maintained by another bank.

1995, c. 301, § 6.1-44.13; 2010, c. 794.

§ 6.2-848. Repealed.

Repealed by Acts 2014, c. 200, cl. 2.

Article 7 - INTERSTATE BANK MERGERS

§ 6.2-849. Definitions.

As used in this article, unless a different meaning is required:

"Bank" has the meaning assigned to it in 12 U.S.C. § 1813 (a) (1) of the Federal Deposit Insurance Company Act of 1956 (12 U.S.C. § 1811 et seq.), as amended.

"Home state" has the meaning assigned to it in § 6.2-836.

"Host state" has the meaning assigned to it in § 6.2-836.

"Interstate merger transaction" means:

1. The merger or consolidation of banks with different home states, and the conversion of branches of any bank involved in the merger or consolidation to branches of the resulting bank; or

2. The purchase of all, or substantially all, of the assets of a bank whose home state is different than the home state of the acquiring bank.

"Out-of-state bank" has the meaning assigned to it in § 6.2-836.

"Out-of-state state bank" has the meaning assigned to it in § 6.2-836.

"Resulting bank" means a bank that has resulted from an interstate merger transaction under this article.

"Virginia bank" means a bank whose home state is Virginia.

"Virginia state bank" has the meaning assigned to it in § 6.2-836.

1995, c. 301, § 6.1-44.16; 2010, c. 794.

§ 6.2-850. Authority to branch outside the Commonwealth by merger.

A. With the prior approval of the Commission, any Virginia state bank may maintain and operate one or more branches in a state other than the Commonwealth pursuant to an interstate merger transaction in which the Virginia state bank is the resulting bank.

B. The Virginia state bank shall file an application on a form prescribed by the Commission, pay the merger fee prescribed by § 6.2-908, and comply with the applicable provisions of Article 12 (§ 13.1-715.1 et seq.) of the Virginia Stock Corporation Act. If the Commission finds that (i) the proposed transaction will not be detrimental to the safety and soundness of the applicant, (ii) any new officers and directors of the resulting bank are qualified by character, experience, and financial responsibility to direct and manage the resulting bank, and (iii) the proposed merger is in the public interest, it may approve the interstate merger transaction and the operation of branches outside Virginia by the Virginia state bank.

C. Such an interstate merger transaction may be consummated only after the applicant has received the Commission's written approval.

1995, c. 301, § 6.1-44.17; 2005, c. 765; 2010, c. 794.

§ 6.2-851. Interstate merger transactions and branching permitted.

Virginia banks may merge with out-of-state banks under this article, and an out-of-state bank resulting from such an interstate merger transaction may maintain and operate the branches in the Commonwealth of a merged Virginia bank, provided the requirements of this article are met.

1995, c. 301, § 6.1-44.18; 2010, c. 794.

§ 6.2-852. Filing requirements.

Any out-of-state bank that will be the resulting bank pursuant to an interstate merger transaction involving a Virginia bank shall submit to the Commission a copy of the application it files with the responsible federal banking agency to engage in the interstate merger transaction. Such submission shall be made at the same time the application is filed by the out-of-state bank with the responsible federal banking agency. All banks which are parties to any interstate merger transaction involving a Virginia bank shall comply with Article 12 (§ 13.1-715.1 et seq.) of the Virginia Stock Corporation Act, as applicable, and with other applicable state and federal laws. Any out-of-state bank resulting from an interstate merger transaction shall comply with Article 17 (§ 13.1-757 et seq.) of the Virginia Stock Corporation Act. The out-of-state bank shall pay any filing fee required by the Commission.

1995, c. 301, § 6.1-44.19; 2005, c. 765; 2010, c. 794.

§ 6.2-853. Conditions for interstate merger.

An interstate merger transaction involving a Virginia bank shall not be consummated, and any out-of-state bank resulting from such a merger shall not operate any branch in the Commonwealth, if the Commission finds that the laws of the home state of any out-of-state bank involved in the interstate merger transaction do not permit interstate merger transactions or finds that the resulting out-of-state bank has not complied with all applicable requirements of any law of the Commonwealth.

1995, c. 301, § 6.1-44.20; 2010, c. 794.

§ 6.2-854. Powers.

A. An out-of-state state bank that establishes and maintains one or more branches in Virginia under this article may conduct the same activities at such branch or branches that are authorized under Virginia law for Virginia state banks, except to the extent such activities may be prohibited by other laws, regulations, or orders applicable to the out-of-state state bank.

B. A Virginia state bank may conduct any activities at any branch outside the Commonwealth that are permissible for a bank chartered by the host state where the branch is located, except to the extent such activities are expressly prohibited by other laws, regulations, or orders applicable to the Virginia state bank.

1995, c. 301, § 6.1-44.21; 2010, c. 794.

§ 6.2-855. Examinations and periodic reports.

A. The Commission may make such examinations of any branch of an out-of-state state bank located in the Commonwealth as the Commission may deem necessary to determine whether the branch is operating in compliance with the laws of the Commonwealth and to ensure that the branch is being operated in a safe and sound manner. The provisions of § 6.2-901 shall apply to such examinations.

B. The Commission may require periodic reports from any out-of-state bank that maintains a branch in the Commonwealth to the extent such reporting requirements (i) apply equally to similarly situated banks having the Commonwealth as their home state and (ii) are not preempted by federal law. Such reports shall be filed under oath with such frequency and in such scope and detail as may be appropriate for the purpose of assuring continuing compliance with the provisions of this article.

1995, c. 301, § 6.1-44.22; 2010, c. 794.

§ 6.2-856. Cooperative agreements; assessment of fees.

A. The Commission may enter into cooperative agreements with the appropriate state bank supervisors and federal banking agencies for the examination of any branch in the Commonwealth of an out-of-state state bank, or any branch of a Virginia state bank in any host state, and may accept such agencies' reports of examination and reports of investigation in lieu of conducting its own examinations or investigations. The Commission may enter into joint actions with other state bank supervisors and federal banking agencies having concurrent jurisdiction over any branch of an out-of-state state bank or any branch of a Virginia state bank, or may take such actions independently to carry out its responsibilities under this article and to assure compliance with the laws of the Commonwealth.

B. Out-of-state state banks may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of the Commonwealth and regulations of the Commission. Such fees may be shared with other state and federal regulators in accordance with agreements between them and the Commission.

1995, c. 301, § 6.1-44.22; 2010, c. 794.

§ 6.2-857. Enforcement.

If the Commission determines that there is any violation of any law of the Commonwealth in the operation of a branch of an out-of-state state bank, or that such branch is being operated in an unsafe and unsound manner, the Commission shall have the authority to undertake such enforcement actions as it would be permitted to take if the branch were a Virginia state bank.

1995, c. 301, § 6.1-44.23; 2010, c. 794.

§ 6.2-858. Regulations; fees.

The Commission may adopt such regulations, and may provide for the payment of such reasonable application and administration fees, as it finds necessary and appropriate in order to implement the provisions of this article.

1995, c. 301, § 6.1-44.24; 2010, c. 794.

§ 6.2-859. Notice of subsequent merger.

An out-of-state state bank that maintains a branch in the Commonwealth under this article shall give 30 days' prior written notice of any merger, consolidation, or other transaction involving the bank that would cause the branch in the Commonwealth to be maintained by another bank.

1995, c. 301, § 6.1-44.25; 2010, c. 794.

Article 8 - DIRECTORS AND OFFICERS; DIVIDENDS

§ 6.2-860. Bank to be managed by board of directors; number of directors.

The affairs of every bank incorporated under the laws of the Commonwealth shall be managed by a board of directors. The board shall consist of not less than five individuals.

Code 1950, § 6-36; 1966, c. 584, § 6.1-45; 1996, c. 268; 2010, c. 794.

§ 6.2-861. Application of Virginia Stock Corporation Act.

The provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.) relating to officers of a corporation shall apply to banks except that, if a bank shall not appoint a secretary, the cashier of a bank shall be deemed to be the secretary of the corporation.

1966, c. 584, § 6.1-46; 2010, c. 794.

§ 6.2-862. Directors to own stock in bank.

A. As used in this section, "bank holding company" means (i) a bank holding company as defined in § 6.2-800 or (ii) any corporation organized under the laws of the Commonwealth and doing business in the Commonwealth that owns all of the capital stock of one bank, except those shares issued as directors' qualifying shares, and at least 66 and two-thirds percent of the assets of the holding company, computed on a consolidated basis, consists of assets held by such bank and controlled subsidiaries of such bank.

B. Every director of a bank incorporated under the laws of the Commonwealth shall be the sole owner of, and have in his personal possession or control, shares of stock in such bank having a book value of not less than $5,000, calculated as of the last business day of the calendar year immediately preceding the election of the director. So long as a director shall successively be reelected, there shall be no requirement to increase the shares of stock owned according to this section. Such stock shall be unpledged and unencumbered at the time such director becomes a director and during the whole of his term as such. A director shall be deemed to be the sole owner of, and have in his personal possession or control:

1. Shares held through a brokerage account or similar arrangement, provided that the director retains sole beneficial ownership and sole legal control over the shares;

2. Shares held jointly or as a tenant in common, but only to the extent of the book value of the shares divided by the number of joint or tenant in common holders;

3. Shares deposited by the director in a living trust, or inter vivos trust, as to which the director is a trustee and retains an absolute power of revocation; or

4. Shares held through a profit-sharing plan, individual retirement account, retirement plan, or similar arrangement, provided that the director retains sole beneficial ownership and sole legal control over the shares.

C. When a bank is controlled by a bank holding company, a director may comply with the requirements of subsection B for each bank of which he is a director by ownership, in similar manner, of shares of capital stock of the bank holding company having an aggregate book value equal to the book value of shares of bank stock that he would be obligated to own under subsection B.

D. A director of a bankers' bank shall not be required to own or control any shares of stock of such bankers' bank or any shares of stock of a bank holding company that controls such bankers' bank.

E. Any director violating the provisions of this section shall, immediately, vacate his office.

F. The requirements of this section shall not apply to any person duly elected a director of a bank prior to July 1, 1995, or so long as such person shall successively be reelected a director, and as to such person the requirements of the law prior to such date shall apply.

Code 1950, § 6-37; 1966, c. 584, § 6.1-47; 1970, c. 95; 1995, c. 63; 1996, cc. 25, 218; 2010, c. 794; 2014, cc. 156, 219; 2018, cc. 76, 262.

§ 6.2-863. Oaths of directors.

A. Every director of a bank incorporated under the laws of the Commonwealth shall, within 30 days after his election or reelection, take and subscribe to an oath that:

1. He will diligently and honestly perform his duties as director; and

2. He is the owner and has in his personal possession or control, standing in his sole name on the books of the bank or bank holding company as defined in subsection A of § 6.2-862, unpledged and unencumbered in any way, shares of stock of the bank of which he is a director or, if a bank is controlled by a bank holding company as defined in § 6.2-800, shares of stock of the bank holding company, having a book value of not less than the amounts respectively prescribed by § 6.2-862, and, in case of reelection or reappointment, that during the whole of his immediate previous term as a director, the stock was not at any time pledged or in any other manner encumbered or hypothecated to secure a loan.

B. The oath subscribed to by such director, certified by the officer before whom it is taken, shall be transmitted by the cashier of such bank to the Commission. Any director who fails for a period of 30 days after his election or appointment to take the oath as required by this section shall automatically forfeit his office.

Code 1950, § 6-39; 1966, c. 584, § 6.1-48; 1992, c. 552; 1994, c. 105; 2010, c. 794; 2014, cc. 156, 219.

§ 6.2-864. Report to Commission of election of director.

Within 60 days following the election or reelection of any person as a director of a bank, the bank shall furnish to the Commission such information as the Commission shall from time to time prescribe regarding the director's personal character, integrity, financial condition, and personal and business background. The report shall be signed under oath by the director and a designated officer of the bank. Any person knowingly making a false statement in such a report is guilty of perjury and punishable as provided in § 18.2-434.

1968, c. 606, § 6.1-48.1; 1992, c. 552; 1994, c. 105; 2010, c. 794.

§ 6.2-865. Removal of director or officer; appeals; penalty.

A. Whenever any director or officer of a bank doing business in the Commonwealth shall continue (i) to violate any law relating to such bank or (ii) unsafe or unsound practices in conducting the business of such bank, after the director or officer, and the board of directors of the bank of which he is a director or officer, have been warned in writing by the Commissioner to discontinue such violation of law or such unsafe or unsound practices, the Commissioner shall certify the facts to the Commission. The Commission shall thereupon enter an order requiring such director or officer to appear before the Commission, within not less than 10 days, to show cause why he should not be removed from office and thereafter restrained from participating in any manner in the management of such bank. Such order shall contain a brief statement of the facts certified to the Commission by the Commissioner. A copy of such order shall be served upon such director or officer, and a copy thereof shall be sent by registered mail to each director of the bank affected.

B. If, after granting the accused director or officer a reasonable opportunity to be heard, the Commission shall find that he has continued to violate any law relating to such bank or has continued unsafe or unsound practices in conducting the business of such bank after he and the board of directors of the bank of which he is a director or officer have been warned as provided in subsection A, the Commission shall enter an order removing such director or officer from office and restraining such director or officer from thereafter participating in any manner in the management of such bank. A copy of such order shall be served upon such director or officer. A copy of such order shall also be served upon the bank of which he is a director or officer. Upon such removal, the director or officer shall cease to be a director or officer of such bank and thereafter shall cease to participate in any manner in the management of such bank.

C. Any director or officer aggrieved by (i) an order of the Commission entered under subsection B or (ii) an order refusing to remove another director or officer from office and to restrain him from participating in the management of the bank, shall have, of right, an appeal to the Supreme Court of Virginia within 60 days from the date of the order.

D. Any director or officer removed and restrained under the provisions of subsection B from participating in any manner in the management of any bank of which he is a director or officer, and who thereafter participates in any manner in the management of such bank except as a stockholder therein, is guilty of a Class 6 felony.

Code 1950, §§ 6-40, 6-41, 6-42; 1966, c. 584, §§ 6.1-49, 6.1-50, 6.1-51; 1979, c. 58; 1992, c. 136; 2010, c. 794.

§ 6.2-866. Meetings of board of directors.

The board of directors of every bank shall hold meetings at least once in each calendar month. At each meeting of the board, a majority of the whole board shall be necessary for the lawful transaction of business. Notwithstanding the foregoing, (i) the shareholders, by bylaw, may fix any number not less than a majority as a quorum and (ii) the Commission may allow less frequent meetings, but not less often than quarterly.

Code 1950, § 6-43; 1966, c. 584, § 6.1-52; 1981, c. 203; 2010, c. 794; 2019, cc. 242, 244.

§ 6.2-867. Discount by officer, director, or employee of paper refused by bank.

No officer, director, or employee of a bank may purchase or discount any note or paper at a rate of interest in excess of what such bank might charge knowing that such bank has refused to purchase or discount such paper.

Code 1950, § 6-44; 1966, c. 584, § 6.1-53; 2010, c. 794.

§ 6.2-868. Bonds required of officers and employees; blanket bond.

A. The board of directors of every bank shall require bonds from all of the active officials and employees of such corporation. In lieu of such bonds, the board may obtain one or more blanket bonds. A bank holding company may obtain a blanket bond covering all affiliate banks within the holding company. The surety on every bond shall be a bonding or surety company authorized to transact business in the Commonwealth. The penalty of any such bond shall be increased whenever in the opinion of the Commission it is necessary for the protection of the public interest.

B. If a bank is unable to obtain the bond required by this section, it shall immediately notify the Commission, which may then direct the bank to have an audit performed at its expense by an independent certified public accounting firm. The bank shall obtain blanket bond coverage as soon as such coverage is available. Failure to obtain blanket bond coverage may be cause for action by the Commission as provided by § 6.2-906.

Code 1950, § 6-46; 1966, c. 584, § 6.1-54; 1974, c. 665; 1979, c. 52; 1992, c. 365; 2010, c. 794.

§ 6.2-869. Dividends; surplus; undivided profits.

A. The board of directors of any bank may declare a dividend of so much as the board shall judge expedient of the net undivided profits of the bank, after providing for all expenses, losses, interest and taxes accrued, or due by such bank. Before any such dividend is declared, any deficit in capital funds originally paid in shall have been restored by earnings to their initial level, and no dividend shall be declared or paid by any bank which would impair the paid-in capital of the bank.

B. To ascertain the net undivided profits before any dividend shall be declared, all debts due to such bank on which interest is past due and unpaid for a period of 12 months, unless the same are well secured and in process of collection by law, shall be deducted from the undivided profits in addition to all expenses, losses, interest and taxes accrued, and the balance shall be deemed to be the net undivided profits.

C. Notwithstanding the foregoing provisions of this section, the Commission may limit or approve the payment of dividends by the board of directors of any bank when the Commission determines that such limitation or approval is warranted by the financial condition of the bank.

Code 1950, § 6-48; 1966, c. 584, § 6.1-56; 1976, c. 658; 1979, c. 53; 1992, c. 48; 1995, c. 84; 2010, c. 794.

Article 9 - INVESTMENTS AND LOANS

§ 6.2-870. Limitation of amount invested in bank premises.

A. No bank, without the approval of the Commission, shall invest in its bank building and premises, property held for future accommodation, or in stock or other obligations of any corporation holding title to premises of the bank, if the aggregate of such investments and loans, together with the amount of any indebtedness of such corporation, 50 percent or more of the stock of which is owned by the bank, will exceed the greater of (i) 50 percent of the capital stock, surplus, and undivided profits of the bank or (ii) 100 percent of the capital stock of the bank. If, subsequent to any investment or loan, the surplus or undivided profits of any such bank are diminished by losses so that the investments or loans amount to more than the greater of (a) 50 percent of its paid-in capital stock and its remaining surplus and undivided profits or (b) 100 percent of the capital stock, the bank shall not pay dividends without the permission of the Commission until such investments or loans are equal to or less than the greater of 50 percent of the capital stock, surplus, and undivided profits, or 100 percent of the capital stock of the bank.

B. In computing the bank's investment in depreciable property, the initial price or cost may be reduced by reasonable depreciation.

C. The Commission shall not in any event approve investments and loans in excess of the foregoing if the aggregate amount thereof would exceed 60 percent of the bank's capital stock, surplus, and undivided profits. The Commission in approving such excess investments may impose, as a condition of such approval, restrictions upon dividends or other restrictions upon the bank. The restrictions shall expire automatically when the investment of the bank in building premises shall no longer exceed the greater of (i) 50 percent of the capital stock, surplus, and undivided profits of the bank or (ii) 100 percent of the capital stock.

Code 1950, § 6-49; 1966, c. 584, § 6.1-57; 1968, c. 61; 2010, c. 794.

§ 6.2-871. Investment in stock or securities of bank service corporations.

A. As used in this section, "bank service corporation" means a corporation engaged primarily in rendering services, other than the renting of the bank premises or the furnishing of furniture or fixtures, to two or more banks.

B. A bank may acquire, own, and hold the stock and other securities or obligations of a bank service corporation in an amount not to exceed 10 percent of the bank's capital stock and permanent surplus. A bank may not invest in any bank service corporation unless it uses or intends to use the services of the bank service corporation. A bank may not invest in more than one bank service corporation without the consent of the Commission.

C. Stock in a Federal Reserve Bank shall not be considered stock of a bank service corporation within the meaning of this section.

Code 1950, § 6-49.1; 1962, c. 38; 1966, c. 584, § 6.1-58; 2010, c. 794.

§ 6.2-872. For what purpose banks may purchase, hold, and convey real estate.

A. In addition to the authority provided in § 6.2-873, every bank incorporated under the laws of the Commonwealth may purchase, hold, and convey the following real estate for the purposes stated and for no other:

1. Real estate that is desirable and prudent for its present or future accommodation in the transaction of its business;

2. Real estate that is mortgaged or otherwise encumbered to it in good faith by way of security for debts contracted;

3. Real estate that is conveyed to it in satisfaction of debts previously contracted in the course of its dealings; and

4. Real estate it purchased at sales under judgments, decrees, mortgages, or deeds of trust held by it, in whole or in part, or purchased to secure debts due to it.

B. Nothing in this section shall affect the validity of the title to any such real estate conveyed or transferred by a bank.

Code 1950, § 6-50; 1966, c. 584, § 6.1-59; 1988, c. 296; 2010, c. 794; 2012, cc. 59, 157.

§ 6.2-873. Additional permissible investments in real estate.

A. In addition to the ownership of real estate permitted in § 6.2-872, a bank may invest:

1. In real estate (i) for the purpose of producing income or for inventory and sale or (ii) for improvement, including the erection of buildings thereon, for sale or rental purposes. The bank may hold, sell, lease, operate, or otherwise exercise the rights of an owner of any such property; and

2. In the stock or other securities or obligations of a controlled subsidiary corporation under § 6.2-885 or 6.2-886 formed or utilized for the purposes in subdivision 1.

B. Unless specifically authorized by the Commissioner:

1. A bank shall not invest more than five percent in the aggregate of its assets in the investments authorized in subdivisions A 1 and A 2.

2. A bank shall not invest and lend in any one project an amount in excess of the loan limit to one borrower as provided in § 6.2-875.

1988, c. 296, § 6.1-59.1; 2010, c. 794.

§ 6.2-874. Prohibited uses of bank's own stock; other investments or loans.

A. No bank shall:

1. Acquire or own its own stock except to protect itself against loss from debts previously contracted, in which case the stock shall be disposed of within 12 months after it is acquired, and except as herein permitted;

2. Make loans collaterally secured by the stock of the bank, except that this section shall not affect the validity of any such security agreement between the bank and its borrower; or

3. Invest any of its funds in:

a. Shares of stock of any other corporation;

b. Any security of a limited liability company; or

c. Any notes or other obligations that are secured by real estate on which the bank is prohibited by § 6.2-878 from making any loans secured thereby.

B. The prohibitions in subsection A shall not prevent any bank from:

1. Acquiring any such stock, notes, or other obligations to protect itself or any fund in its custody or possession against loss from debts theretofore contracted;

2. Acquiring, owning, and holding stock of a building corporation or security of a limited liability company of the character and to the amount provided by § 6.2-870;

3. Acquiring, owning, and holding stock of an agricultural credit corporation organized under the laws of the Commonwealth, provided that the total amount of such stock shall not exceed 20 percent of the amount of the capital stock of the bank actually paid in and unimpaired, plus the amount of its unimpaired surplus fund;

4. Acquiring, owning, and holding stock of the Federal National Mortgage Association, the Government National Mortgage Association, or the Federal Home Loan Mortgage Corporation;

5. Acquiring, holding, and owning stock in any corporations or securities of limited liability companies which have as their purpose the operation of parking lots or parking garages, provided that no bank shall own, at any one time, stock in such corporations exceeding two percent of the amount of the capital stock of such bank actually paid in and unimpaired, plus the amount of its unimpaired surplus fund;

6. Acquiring, owning, and holding stock of a small business investment company as defined by the Federal Small Business Investment Act of 1958;

7. Acquiring, owning, and holding stock of an industrial development company organized under the provisions of the Virginia Industrial Development Corporation Act (§ 13.1-981 et seq.);

8. Acquiring, owning, and holding stock of a bank service corporation or security of a controlled subsidiary corporation, subject to § 6.2-871 or 6.2-885, or from investing in a limited liability company, provided such investment conforms to § 6.2-871 or 6.2-885;

9. Acquiring, owning, and holding stock of the Student Loan Marketing Association, a corporation organized under the Higher Education Act of 1965, as amended;

10. Acquiring, owning, and holding stock of a "clearing corporation" as defined in § 8.8A-102;

11. Acquiring, owning, and holding stock of a trust subsidiary as defined in § 6.2-1000;

12. Investing up to four percent of its capital and surplus, including undivided profits, in shares of any bankers' bank organized under § 6.2-809 or in any bank holding company wherein the ownership of shares in such bank holding company is restricted to (i) financial institutions which have or are eligible for insurance of deposits by a federal agency or (ii) a financial institution holding company as defined in § 6.2-700 or a savings institution holding company as defined in § 6.2-1100;

13. Acquiring its own stock, with the book value of all such stock held not to exceed in the aggregate five percent of the book value of all shares issued and outstanding, including capital, surplus, and undivided profits as of the time of the purchase being made. In computing such capital surplus and undivided profits for purposes of this section, amounts received for resale of any repurchased stock shall be added back to capital, surplus, and undivided profits for purposes of computation of the five percent limitation. Such purchase may be without the written consent of the Commission, unless the Commission or Commissioner has previously notified the bank in writing that it may not utilize this subdivision until further notice. The Commission may further allow purchases of such stock in excess of such five percent criterion if the Commission finds that the purchase (i) will not impair the safety and solvency of the bank and (ii) is otherwise appropriate. The Commission may require the divestiture of any shares held if deemed necessary and appropriate;

14. Acquiring, owning, and holding, subject to such conditions as the Commissioner may prescribe, shares of investment companies;

15. Acquiring, investing in, owning, and holding, directly or indirectly, subject to such conditions as the Commissioner may prescribe, equity investments in a corporation, a limited partnership, a limited liability company, or another entity organized as (i) a community development corporation; (ii) an entity formed primarily to support community-based economic development; (iii) an entity qualifying for the new markets tax credit under 26 U.S.C. § 45D; (iv) an entity formed for a predominantly civic, community, or public purpose that (a) primarily benefits low-income and moderate-income individuals, (b) primarily benefits low-income and moderate-income areas, (c) primarily benefits areas targeted for redevelopment by a government entity, or (d) is a qualified investment under 12 C.F.R. § 25.23 for the purposes of the Community Reinvestment Act of 1977, 12 U.S.C. § 2901 et seq.; or (v) an entity making qualified rehabilitation expenditures with respect to a qualified rehabilitated building or certified historic structure, as such terms are defined in 26 U.S.C § 47, or a similar state historic tax credit program, as provided for in § 619(d)(1)(E) of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. § 1851(d)(1)(E);

16. Acquiring, owning, and holding shares of the Federal Agricultural Mortgage Corporation;

17. Acquiring, owning, and holding shares of a Federal Home Loan Bank;

18. Establishing, acquiring, investing in, owning, and holding shares of a rural business investment company or any entity established to invest solely in a rural business investment company as permissible under 7 U.S.C. § 2009cc-9(a)(1)(A) and 7 U.S.C. § 2009cc-9(b);

19. Engaging, directly or indirectly, in any tax equity finance transaction permissible for a national bank or federal savings association under 12 C.F.R. § 7.1025. The authority to engage in tax equity finance transactions under this section is separate from and does not limit any investment authorities available to a bank. A tax equity finance transaction is subject to the substantive legal requirements of a loan; or

20. Acquiring, investing in, owning, and holding shares, directly or indirectly, subject to such conditions as the Commissioner may prescribe, in any community and economic development entity, community development project, or other public welfare investment, provided that the investment is in compliance with 12 C.F.R. Part 24.

C. The provisions of this section shall not be construed to require a bank to dispose of any preferred stocks lawfully acquired as an investment prior to January 1, 1940.

1982, c. 185, § 6.1-60.1; 1985, c. 339; 1986, c. 269; 1987, c. 297; 1988, c. 464; 1989, cc. 377, 650; 1992, c. 366; 1993, c. 186; 1994, c. 119; 1996, c. 27; 2010, c. 794; 2023, cc. 543, 544.

§ 6.2-875. Limitations on obligations of borrowers.

A. As used in this section:

"Derivative transaction" shall include 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 or more commodities, securities, currencies, interest or other rates, indices, or other assets.

"Installment consumer paper" shall include installment notes of up to 10 years' duration for the purchase of unimproved real property.

"Obligation" means the direct liability of the maker or acceptor of the paper discounted with or sold to a bank and the liability of the endorser, drawer, or guarantor who obtains a loan from or discounts paper with or sells paper under his guaranty to such bank. "Obligation" shall include:

1. In the case of obligations of a corporation or a limited liability company, all obligations of all subsidiaries thereof in which the corporation or limited liability company owns or controls a majority interest;

2. Any liability of the bank under a letter of credit, other than a letter of credit arising out of transactions involving the importation or exportation of goods or the domestic shipment of goods, except to the extent (i) the bank has a binding participation of another bank, organized under the laws of the Commonwealth or another state or the United States, or a written commitment by another such bank to assume primary liability therefor or (ii) such bank issuing the letter of credit has in its possession money on deposit to the credit of such customer or securities or assets readily convertible into cash with which to honor such letter of credit; and

3. Any credit exposure to a person arising from a derivative transaction between the bank and the person.

B. Subject to the exceptions set forth in subsections D, E, F, and I, the total obligations of any person, including, with respect to a partnership, as provided in subsection C, the partners having a five percent or greater interest in either the income or capital of a partnership other than limited partners, to any bank shall at no time exceed 15 percent of the sum of the capital, surplus, and loan loss reserve of such bank.

C. For the purposes of this section:

1. The obligation of partners in the partnership and the partnership shall not be combined with each other except if (i) the purpose for which the obligation of any partner was incurred or utilized relates to the partnership or the purposes of the partnership, including acquisition of an interest in the partnership, such obligation shall be combined with the obligation of the partnership or (ii) the primary source of repayment of a partner's individual obligation is the partnership or funds therefrom, the obligation of the partnership shall be combined with the obligation of such partner, other than a limited partner or partner with less than five percent interest, and the limitation specified herein shall apply to the combined obligations of each such partner and the partnership. Except in the two instances specified in clauses (i) and (ii), the individual liability of the partner shall not be treated as an obligation of the individual, and the obligations of partner as individual guarantor on partnership obligations shall not be treated as an obligation of the individual for purposes of computation hereunder when, in either case, the bank has a certificate of a responsible officer, designated by the board of directors for this purpose, stating that the responsibility of the partnership for each obligation has been evaluated and the bank is relying primarily upon such partnership for the payment of such indebtedness; and

2. There may be counted as part of the surplus (i) the undivided profits as of the date of the most recent call statement and (ii) capital notes and debentures, the issuance of which has been approved by the Commission, outstanding as of said date, and consisting of debt obligations subordinate to all other contractual liabilities of the bank.

D. The following kinds of obligations shall not be subject to any limitation, except as expressly stated in subdivision 20:

1. Obligations in the form of drafts or bills of exchange drawn in good faith against actually existing values;

2. Obligations arising out of the discount of commercial or business paper actually owned by the person, partnership, association, limited liability company, or corporation negotiating the same;

3. Obligations drawn in good faith against actually existing values and secured by goods or commodities in process of shipment;

4. Obligations in the form of banker's acceptances of other banks of the kind described in section thirteen of the Federal Reserve Act;

5. Obligations of the United States, the Commonwealth, or any political subdivision of the Commonwealth, including sanitary or public facilities districts;

6. Obligations fully guaranteed or insured by a state or by a state authority for the payment of the obligation of which the faith and credit of the state is pledged;

7. First mortgage real estate loans that are insured by the Federal Housing Administrator;

8. Obligations guaranteed as to principal and interest by the United States;

9. Loans in which the Small Business Administration or a federal reserve bank has definitely agreed or committed itself to participate, to the extent of such participation;

10. Obligations guaranteed by the Small Business Administration or Farmers Home Administration, to the extent of such guaranty;

11. Loans that the Federal Commodity Credit Corporation has definitely agreed to purchase;

12. Direct obligations of, and obligations guaranteed by, the Export-Import Bank;

13. Loans guaranteed by a federal guaranteeing agency pursuant to the Defense Production Act of 1950;

14. Bonds and notes of the Federal National Mortgage Association;

15. Bonds, debentures, and other similar obligations of Federal Land Banks, Federal Intermediate Credit Banks, or Banks for Cooperatives issues pursuant to acts of Congress;

16. Obligations of the Federal Financing Bank, the Student Loan Marketing Association, the Federal Home Loan Mortgage Corporation, the National Credit Union Administration, Farm Credit Banks, the Government National Mortgage Association, or the Commodity Credit Corporation;

17. Time deposits in, or obligations issued by, a Federal Home Loan Bank;

18. Repurchase agreements of obligations authorized by this subsection;

19. Obligations of any person, secured by not less than a like amount of bonds or notes or other evidences of indebtedness of the United States or of the Commonwealth;

20. Obligations as endorser or guarantor of installment consumer paper that carry a full or limited endorsement or guarantee of the person transferring the same when the bank has a certificate of a responsible officer, designated by its board of directors for that purpose, stating that the responsibility of the maker of such obligation has been evaluated and the bank is relying primarily upon such maker for the payment of such obligation. In such case the limitations of this section as to the obligations of the maker shall be the sole applicable loan limitation; and

21. Obligations secured by the pledge or assignment of certificates of deposit or saving certificates of the lending bank, to the extent of the principal amount of such certificates so pledged or assigned.

E. The following kinds of obligations shall be subject to a limitation of 30 percent of such capital and surplus:

1. Obligations as endorser or guarantor of notes, other than commercial or business paper excepted under subdivision D 2 having a maturity of not more than six months, and owned by the person endorsing and negotiating the same;

2. Obligations of any person in the form of notes or drafts secured by shipping documents or instruments (i) transferring or securing title covering livestock or (ii) giving a lien on livestock when the market value of the livestock securing the obligations is not at any time less than 115 percent of the amount by which the obligations exceed 15 percent of such capital and surplus; and

3. Obligations secured by bonds or notes of the United States, or bonds of the Commonwealth or any of its political subdivisions, if the face value thereof is at least equal to the excess of the obligations over 15 percent of such capital and surplus.

F. Nonrenewable obligations having not more than 10 months to run consisting of notes or drafts secured by shipping documents, warehouse receipts, or similar documents creating a security interest in readily marketable, nonperishable, staple commodities, insured to the extent that insurance is customarily required, shall be subject to a sliding scale limitation up to 50 percent of such capital, surplus, and undivided profits. The sliding scale limitation shall require that when the face amount of the obligation exceeds 15 percent of such capital and surplus by any number of percentage points up to 35, the market value of the security for the obligation shall exceed the face amount of the obligation by at least the same number of percentage points.

G. The Commission shall adopt necessary regulations to require entities that would otherwise be treated as separate entities to be treated as related for the purposes of compelling reporting not more frequently than quarterly, to the Commission of the aggregate obligations of such parties to the bank. For the purposes of this subsection:

1. The Commission may treat as related parties individuals that are in the same household or that are the parents, grandparents, children, or grandchildren of each other whether or not in the same household;

2. Any person owning as much as 34 percent of stock of a corporation or being an officer or director of such corporation may be treated as related to such corporation;

3. Any person entitled to a share of the profits and losses of or distributions from a limited liability company, or who is a manager of a manager-managed limited liability company or a member of a member-managed limited liability company, may be treated as related to the limited liability company; and

4. Any person having an interest in income or capital of a partnership may be treated as a related party.

H. All loans made by a bank in excess of 15 percent of its capital and surplus shall be approved by the board of directors or the executive committee of the bank by resolution recorded in the bank's minute book.

I. Notwithstanding the limitations in this section, the Commission may by regulation authorize state banks to make loans to one borrower in such amounts as may be authorized under any lending limit laws applicable to national banks.

J. The Commission may adopt such regulations as it deems appropriate to (i) further define the term "derivative transaction" and (ii) set forth the rules for calculating credit exposures arising from derivative transactions. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules.

Code 1950, § 6-76; 1952, c. 23; 1958, c. 74; 1960, c. 27; 1966, c. 584, § 6.1-61; 1970, c. 42; 1974, c. 557; 1977, cc. 110, 466; 1978, c. 683; 1984, c. 134; 1987, c. 494; 1994, c. 290; 2002, c. 186; 2006, c. 912; 2010, c. 794; 2013, cc. 98, 126.

§ 6.2-876. Loans to executive officers or directors.

A. The maximum amount of loans and other extensions of credit a bank may make to any of its executive officers or directors, and the conditions and procedures for approval of such extensions of credit, shall be governed by Federal Reserve Board Regulation O, 12 C.F.R. Part 215, whether or not the bank is a member of the Federal Reserve System.

B. The aggregate amount of a bank's extensions of credit to its executive officers or directors, and their interests, shall not be excessive. The Commission shall adopt such regulations as may be required to prevent excessive aggregate amounts of extensions of credit by a bank to such persons and their interests.

Code 1950, § 6-77; 1966, c. 584, § 6.1-62; 1976, c. 658; 1978, c. 683; 1987, c. 351; 1995, c. 82; 1996, c. 13; 2004, c. 320; 2010, c. 794.

§ 6.2-877. Overdrafts by bank officer or director.

No bank shall pay an overdraft of an executive officer or director of the bank on an account at the bank unless the payment of funds is made in accordance with (i) a written, preauthorized, interest-bearing extension of credit plan that specifies a method of repayment or (ii) a written, preauthorized transfer of funds from another account of the account holder at the bank. This prohibition does not apply to the payment of inadvertent overdrafts on an account in an aggregate amount of $1,000 or less if (a) the account is not overdrawn for more than five business days and (b) the member bank charges the executive officer or director the same fee charged any other customer of the bank in similar circumstances.

1981, c. 343, § 6.1-62.1; 2010, c. 794.

§ 6.2-878. Loans secured by real estate generally.

A. As used in this section, "loan secured by real estate" means an obligation executed or assumed by the borrower that is secured by mortgage, deed of trust, or similar instrument, encumbering real estate that is owned by the borrower and upon which the bank relies as the principal security for the loan.

B. No bank shall make any loan secured by real estate when such loan, together with all prior liens or encumbrances on such real estate, exceeds 90 percent of the appraised value of the real estate securing such loan.

C. The appraisals necessitated by this section shall be required if the loan shall equal or exceed an amount established from time to time by the Commissioner. In establishing such amount, the Commissioner shall take into consideration the requirements imposed on banks under applicable federal regulations. Such appraisals shall be in writing, signed by the appraisers, and shall be retained in the files of the bank, subject to examination of bank examiners. The appraisers so appointed shall be experienced persons competent to appraise real estate in the locality where the real estate is located.

D. Any bank may make loans secured by real estate that do not comply with the limitations and restrictions in this section if the total unpaid amount of such loans, exclusive of the loans that subsequently comply with such limitations and restrictions, does not exceed 10 percent of the total amount of loans secured by real estate.

E. The provisions of this section relating to ratio of loan to appraised value and appraisal shall not apply if:

1. The real estate security is taken solely as an abundance of caution on terms which are not more favorable than they would be in absence of such a lien on real estate;

2. A real estate security conveyance is taken by or ancillary to the assignment of lease obligations upon which the bank is relying primarily and prudently;

3. A subsequent transaction results from an existing extension of credit providing (i) that the borrower has performed satisfactorily, (ii) there is no advance of new money, except as formerly agreed, (iii) the credit standing of the borrower is not deteriorating, and (iv) there is no obvious and noticeable deterioration of marketing conditions or the physical assets which provide collateral security to the bank; or

4. A lien upon real estate is taken to secure a prior advance which was not secured by such real estate.

F. In cases where an appraisal by a state-certified or state-licensed appraiser is not required, under this section or other sections of this chapter in a real estate-related financial transaction, the bank as a matter of prudence may take and preserve a reasonable appraisal, valuation, or analysis of real estate or real property in connection with such transaction.

G. The Commission may by order or regulation eliminate loans or specific categories of loans from the requirements of this section.

H. The provisions of this section shall not be construed to prohibit any bank from accepting, as security for a loan that it had made in good faith without security or upon security since found to be inadequate, an obligation or obligations secured by mortgage, deed of trust, or other such instrument upon real estate.

Code 1950, § 6-78; 1952, c. 25; 1956, c. 622; 1960, c. 23; 1964, c. 150; 1966, c. 584, §§ 6.1-63, 6.1-65; 1968, c. 549; 1972, c. 189; 1976, c. 487; 1978, c. 624; 1979, c. 375; 1981, c. 271; 1982, c. 263; 1984, c. 133; 1988, c. 170; 1991, c. 160; 1992, c. 68; 1994, c. 501; 2005, c. 263; 2010, c. 794.

§ 6.2-879. Certain loans not considered loans secured by real estate.

A. If the bank reasonably and prudently relies upon factors other than or in addition to the real estate security, such as general credit standing, guarantees, commitments, or tangible or intangible personal property security, and enters in its records a written statement of the factors it relies on, the loan does not constitute a loan secured by real estate within the meaning of § 6.2-878, except that if the terms of the transaction shall be more favorable than in the absence of a lien, an appraisal shall be required as provided under § 6.2-878.

B. Loans made to homeowners for maintenance, repair, landscaping, modernization, alteration, improvement to, and furnishings and equipment for, their homes, whether or not secured, shall not be considered as loans secured by real estate within the meaning of § 6.2-878, provided each such loan shall (i) be payable in approximately equal monthly installments, (ii) not be for a term longer than 12 years, and (iii) not exceed an amount specified in accordance with subsection C of § 6.2-878. Such home loans may otherwise be made under the provisions of § 6.2-878 or 6.2-880. If such loan is in excess of the amount specified under subsection C of § 6.2-878, unless the taking of real estate security is solely in the abundance of caution and the terms are not more favorable than in the absence of such a real estate lien, an appraisal as required by § 6.2-878 or 6.2-880 shall be required by the bank.

Code 1950, §§ 6-78, 6-79.2; 1952, c. 25; 1956, c. 622; 1960, c. 23; 1962, c. 267; 1964, c. 150; 1966, c. 584, §§ 6.1-65, 6.1-66; 1970, c. 13; 1976, c. 94; 1980, c. 714; 1991, c. 160; 1994, c. 501; 2005, c. 263; 2010, c. 794.

§ 6.2-880. Construction loans.

A. As used in this section, "construction loan" means a loan (i) made to finance the construction of a building or otherwise to improve real estate and (ii) with a maturity not exceeding 60 months.

B. A construction loan that is accompanied by a valid and binding agreement to advance an amount equal to or greater than the construction loan upon the completion of the building or improvement, which agreement is entered into by an individual or entity acceptable to the bank or the bank itself, whether or not secured by a mortgage or similar lien on the real estate upon which the building or improvement is being constructed, shall not be considered as a loan secured by real estate within the meaning of § 6.2-878, but shall be classed as an ordinary commercial loan, unless the terms of the transaction shall be more favorable than in the absence of a lien, in which case an appraisal shall be required as provided under § 6.2-878.

C. No bank shall invest in, or be liable in, construction loans in an aggregate amount in excess of 100 percent of its capital and surplus, except that any such loans supported by an executed agreement for permanent financing shall not be included in such aggregate amount.

D. Loans to finance construction of buildings or otherwise to improve real estate may be made under this section or under the provisions of § 6.2-878.

E. Loans made under subsection H of § 6.2-878 or subsection A of § 6.2-879 shall not be treated as construction loans for purposes of the limitations of this section.

Code 1950, § 6-78; 1952, c. 25; 1956, c. 622; 1960, c. 23; 1964, c. 150; 1966, c. 584, § 6.1-64; 1970, c. 14; 1972, c. 189; 1981, c. 271; 1991, c. 160; 1995, c. 87; 2006, c. 273; 2010, c. 794.

§ 6.2-881. Investment in reverse annuity mortgages.

A bank may invest in reverse annuity mortgages to the extent and in the manner that may be provided in regulations adopted by the Commission.

1979, c. 386, § 6.1-65.1; 1994, c. 501; 2010, c. 794.

§ 6.2-882. Bank borrowing money or rediscounting its notes.

A. Any bank borrowing money or rediscounting any of its notes shall at all times show on its books and accounts and in its reports the amount of such borrowed money or rediscounts.

B. No officer, director, or employee of any bank shall issue the note of such bank for borrowed money or rediscount any note or pledge any of the assets of such bank, except when authorized by resolution of the board of directors of such bank previously made and entered upon the minutes of such bank, under such regulations and in such form as may be adopted by the Commission.

Code 1950, § 6-80; 1966, c. 584, § 6.1-67; 1994, c. 7; 2010, c. 794.

§ 6.2-883. Acceptance of drafts or bills of exchange; issuance of letters of credit.

A. Any bank doing business in the Commonwealth, subject to conditions, limitations, and restrictions imposed by the Commission, may (i) accept for payment at a future date drafts or bills of exchange drawn upon it by its customers on time not exceeding six months and (ii) issue letters of credit, upon such terms and conditions and of such duration as may be deemed appropriate by such bank, that authorize the holders thereof to draw drafts upon it or its correspondent, which drafts may be payable at sight or may be accepted for payment from the date of presentment on time not exceeding six months.

B. The Commission, in adopting conditions, limitations, and restrictions with respect to such acceptances or letters of credit, shall use as a standard or guide the respective conditions, limitations, and restrictions, if any, imposed from time to time by federal statute or by the Federal Reserve Board on its member banks.

Code 1950, § 6-82; 1966, c. 584, § 6.1-68; 1974, c. 81; 1976, c. 152; 1994, c. 7; 2010, c. 794.

§ 6.2-884. Ownership and lease of personal property.

A. As used in this section, "personal property" includes fixtures.

B. A bank may become the owner and lessor of personal property, subject to the following limitations:

1. Except in the case of short-term leases where a subsequent sale or reletting is anticipated, the rentals receivable by the bank under the initial lease of any item of personal property shall equal at least the cost to the bank of such item of personal property;

2. Any leasing or rental obligations to any bank of any person shall be treated as obligations subject to the limitations imposed by § 6.2-875; and

3. Upon the expiration of any lease whether by virtue of the lease agreement or by virtue of the retaking of possession by the bank, the personal property shall be sold or otherwise disposed of, or charged off within one year from the time of expiration of such lease unless it is held for the purpose of reletting.

C. No personal property acquired pursuant to this section shall be included in computable investment in fixed assets under § 6.2-870.

1968, c. 56, § 6.1-68.1; 1989, c. 482; 2010, c. 794.

§ 6.2-885. Investment in stock or securities of controlled subsidiary corporations.

A. As used in this section and §§ 6.2-886, 6.2-887, and 6.2-888:

"Control" has the meaning assigned to it in § 2 of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.).

"Controlled subsidiary corporation" means a corporation that is controlled by a bank organized under the laws of the Commonwealth, or by more than one bank, at least one of which is organized under the laws of the Commonwealth.

B. A bank may acquire, own, and hold the stock, securities, or obligations of one or more controlled subsidiary corporations. Such investment in stock, securities, or obligations, together with any investment of the bank in stock, securities, or obligations of a bank service corporation, shall not exceed in the aggregate 50 percent of the bank's capital stock and permanent surplus, without the permission of the Commission, which limit on investment shall not include, but shall be in addition to, investment in (i) a real estate subsidiary as provided in § 6.2-873, (ii) the stock, securities, or obligations of a building corporation under § 6.2-870, and (iii) controlled subsidiary corporations that are wholly owned by the bank.

C. A controlled subsidiary corporation shall not be authorized to (i) receive deposits except as hereafter provided; (ii) engage in the trust business; or (iii) conduct any business that is required under § 13.1-620 to be specifically stated in the articles of incorporation, except a controlled subsidiary corporation may engage in the business of credit card operations, leasing, safe deposit, factoring, credit bureaus, mortgage brokerage or servicing, data processing, international banking and finance, and any other function or business activity in which a bank might engage, except the receipt of deposits, or the trust business. Subject to the foregoing limitations on the businesses that a controlled subsidiary corporation is authorized to conduct, and with the prior approval of the Commission and subject to such conditions as the Commission may impose, a controlled subsidiary corporation may also engage in any business that is authorized by statute, regulation, or official interpretation for a subsidiary of a national bank or an out-of-state state bank as defined in § 6.2-836 to the extent such activity is financial in nature, or incidental or complimentary to a financial activity, and is not otherwise prohibited by state law. A controlled subsidiary corporation transacting business as a real estate brokerage firm shall be governed by § 6.2-888 and be subject to the provisions of this section. A controlled subsidiary corporation may charge and collect such finance charges and fees or interest rates as are authorized to banks by the laws of the Commonwealth or as otherwise authorized by Chapter 3 (§ 6.2-300 et seq.).

D. A controlled subsidiary corporation engaged solely in the business of international banking and finance, and subject to the regulation and supervision by the Board of Governors of the Federal Reserve System, shall not be prohibited from receiving deposits or from taking any other action that any such regulated international banking and finance institution is permitted to take.

E. The provisions of § 6.2-874 relating to investment of funds in shares of stock of another corporation shall be applicable to controlled subsidiary corporations, except that a controlled subsidiary corporation may acquire, own, and hold stock in a subsidiary corporation if a bank would be permitted to directly acquire, own, or hold the stock hereunder. The provisions of § 6.2-876 relating to loans to officers, directors, or employees of the bank shall be applicable both to loans by the subsidiary to officers, directors, or employees of the bank and to loans by the bank to officers, directors, or employees of the subsidiary, with the approval of the board of directors of the bank only being required for purposes of § 6.2-876. The limitations of §§ 6.2-878 through 6.2-881 as they relate to appraisal value, maximum term, and amortization on loans secured by real estate shall be applicable to controlled subsidiary corporations. Notwithstanding any provisions of this subsection to the contrary, the restrictions set out in §§ 6.2-874 through 6.2-881 shall not be imposed upon any controlled subsidiary that has no state banks as shareholders.

F. The provisions of § 6.2-875 relating to limitations upon obligations of any one borrower shall apply to the total obligations of any borrower in the aggregate to the subsidiary corporation and to any bank or bank holding company owning stock securities or obligations of such subsidiary corporation. The loan limit of the subsidiary shall be computed by attributing to the subsidiary a pro rata share of the lending limit of each bank stockholder prorated in accordance with the percentage of stock owned by such bank. However, in the case of a subsidiary, any of the stock, securities, or other obligations of which are owned by a bank holding company, the loan limits of the subsidiary shall be computed by attributing to the subsidiary a pro rata share of the lending limits of all bank subsidiaries of such holding company, which share shall be prorated based on the percentage of stock owned by the holding company and all subsidiary banks thereof. In computing whether a bank or a subsidiary that is not wholly owned is complying with its lending limit, the loans of the bank and the subsidiary to any common borrower shall be aggregated on a basis pro rata to the percentage of stock of the subsidiary owned by the bank. Such controlled subsidiary corporation shall not otherwise be subject to the provisions of this chapter except where it is expressly so provided. Notwithstanding any provisions of this subsection to the contrary, the restrictions set out in §§ 6.2-874 through 6.2-881 shall not be imposed upon any controlled subsidiary that has no state banks as shareholders.

1968, c. 270, § 6.1-58.1; 1978, c. 797; 1988, c. 296; 1993, c. 64; 1997, c. 277; 1999, c. 60; 2001, c. 508; 2003, cc. 536, 558; 2010, c. 794.

§ 6.2-886. Regulation of controlled subsidiary corporations by Commission.

A. A controlled subsidiary corporation shall be subject to audit and examination by the Commission whether or not it is an affiliate as defined in § 6.2-899. The controlled subsidiary corporation shall pay such examination fees as shall be imposed under § 6.2-908 for the examination of trust departments. If upon examination the Commission shall ascertain that the corporation is created or operated in violation of this section or that the manner of operation is detrimental to the business of the parent bank and its depositors, it may order the bank to dispose of all or part of its investment in such corporation upon such terms as the Commission may deem proper.

B. A controlled subsidiary may not merge or consolidate unless the surviving corporation is itself a controlled subsidiary corporation, or unless as a result of such merger or consolidation the bank divests itself of all stock or other securities that are held pursuant to the authority granted by this section.

C. The Commission shall have the same powers over controlled subsidiary corporations as it has over banks under §§ 6.2-913, 6.2-915, 6.2-917, 6.2-918, and 6.2-919, excepting those controlled subsidiary corporations that have no state banks as stockholders.

1968, c. 270, § 6.1-58.1; 1978, c. 797; 1988, c. 296; 1993, c. 64; 1997, c. 277; 1999, c. 60; 2001, c. 508; 2003, cc. 536, 558; 2010, c. 794.

§ 6.2-887. Insurance business of controlled subsidiary.

A. In addition to the types of business authorized in § 6.2-885, a controlled subsidiary corporation that is a domestic or foreign corporation, the majority of the voting stock of which is owned, directly or indirectly, by (i) a bank or banks organized under the laws of the United States, (ii) a bank or banks organized under the laws of the Commonwealth, (iii) a bank or banks organized under the laws of another state, or (iv) a bank holding company owning a bank or banks in the Commonwealth or in another state, may be formed to:

1. Transact the type of insurance business specified in § 38.2-120 and other insurance normally written under the coverage known as financial institution blanket bonds;

2. Underwrite insurance indemnifying the bank, its holding companies or its affiliates, and their directors and officers against liability; and

3. Underwrite reinsurance of mortgage guaranty insurance, subject to such conditions as the Commission may impose, on loans secured by real estate made or purchased by such controlled reinsurance subsidiary's affiliates or by a bank owning such controlled subsidiary.

B. Any such controlled subsidiary corporation shall (i) transact only the insurance business specifically permitted by this section and (ii) be subject to the further provisions of Title 38.2 otherwise applicable to insurance companies transacting a comparable business.

C. The investment of any bank in the stock, services, or other obligations of such a controlled subsidiary shall not exceed two percent of such bank's capital, surplus, and undivided profits.

1976, c. 340, § 6.1-58.2; 1977, c. 190; 1986, c. 638; 1998, c. 48; 2010, c. 794.

§ 6.2-888. Real estate brokerage business of controlled subsidiary.

A. In addition to the types of business authorized in §§ 6.2-885 and 6.2-887, a controlled subsidiary corporation may be formed and licensed to transact business as a real estate brokerage firm in accordance with § 54.1-2106.1, provided such controlled subsidiary corporation transacts the real estate brokerage business and such services only in accordance with the specific provisions of this section. Such controlled subsidiary corporation shall be subject to the provisions of Chapter 21 (§ 54.1-2100 et seq.) of Title 54.1 that are otherwise applicable to real estate brokerage companies transacting a comparable business.

B. A controlled subsidiary corporation of a state bank may own and transact business as a real estate brokerage firm and provide the services of a real estate brokerage firm, only upon the Commission's determination that the state bank making application to do so is in full compliance with applicable law. The investment of any bank in the stock, securities, or other obligations of a controlled subsidiary corporation shall be approved by the Commission only upon a determination by the Commission that (i) the depositors of the bank are adequately protected from the risk of such ownership and (ii) the ownership is a safe and sound investment for the bank in accordance with applicable law. Such determination shall include but not be limited to providing written notice to the Virginia Real Estate Board and receiving written confirmation from the Virginia Real Estate Board that the real estate brokerage firm, to be owned, and its brokers, are in good standing in accordance with the requirements of Chapter 21 (§ 54.1-2100 et seq.) of Title 54.1.

C. A controlled subsidiary corporation of a state bank may own and transact business as a real estate brokerage firm only in compliance with the following:

1. The controlled subsidiary corporation, or a state bank that owns a controlled subsidiary corporation, that engages in real estate brokerage, shall not:

a. Impose a requirement, orally or in writing, that a borrower shall contract for or enter into any other arrangement for real estate services with its affiliated real estate brokerage firm;

b. Impose a requirement, orally or in writing, that as a condition of approving a loan a borrower shall contract or enter into any other arrangement with its affiliated real estate brokerage firm;

c. Impose a requirement, orally or in writing, that a real estate brokerage customer shall make application for a loan or any other service or services of a particular bank or any of its subsidiaries, affiliates, or service entities, except as otherwise permitted under the federal Real Estate Settlement Procedures Act of 1974 (12 U.S.C. § 2601 et seq.) and regulations adopted thereunder;

d. Impose a requirement, orally or in writing, that a condition of providing real estate brokerage services is that the customer shall make application for a loan or any other arrangement for other services of the bank or any of its subsidiaries, affiliates, or service entities, except as otherwise permitted under the federal Real Estate Settlement Procedures Act of 1974 (12 U.S.C. § 2601 et seq.) and regulations adopted thereunder;

e. Offer or provide more favorable consideration, terms, or conditions for any financial products or services to induce or attempt to induce a person to enter into any arrangement for real estate brokerage services with any particular real estate brokerage firm;

f. Offer or provide more favorable terms or conditions for any real estate brokerage services to induce or attempt to induce a person to apply for a loan or obtain any other services of a particular bank or any of its subsidiaries, affiliates, or service entities;

g. Conduct real estate brokerage activities in the same areas of a building where the bank routinely accepts retail deposits from the general public;

h. Conduct real estate brokerage activities in areas of a building that are identified as areas where banking activities occur;

i. Conduct banking activities in areas of the building that are identified as areas where real estate brokerage activities occur;

j. Make payment to its employees for any referrals of real estate brokerage business;

k. Use confidential credit and other financial information available from the bank for solicitation purposes by a real estate brokerage affiliate, without first having obtained the written consent of the customer;

l. Use or transfer from a bank to any affiliated real estate brokerage firm any financial information of or relating to any unaffiliated competing real estate brokerage firm that is an actual or prospective customer; or

m. Use, directly or indirectly, nonpublic customer information that is held or obtained by the bank for the purpose of soliciting real estate business, without first having obtained the written consent of the customer;

2. A state bank that makes a referral to its affiliated real estate brokerage firm shall clearly and conspicuously disclose in writing, in a separate document, to any person who applies for credit related to a real estate transaction or applies for prequalification or preapproval for credit related to a real estate transaction, that the person is not required to consult with, contract for, or enter into an arrangement for real estate brokerage services with its affiliated real estate brokerage firm; and

3. A real estate brokerage firm that is affiliated with a bank shall clearly and conspicuously disclose in writing, in a separate document, before the time an agency agreement for real estate brokerage services is executed, that the person is not required to apply, contract for, or enter into any other arrangement for services of a particular bank or any of its subsidiaries, affiliates, or service entities.

D. The requirements of this section are in addition to the requirements of the federal Real Estate Settlement Procedures Act of 1974 (12 U.S.C. § 2601 et seq.) and regulations adopted thereunder.

E. State banks owning and transacting business as real estate brokerage firms under this section are subject to the provisions of Chapter 9 (§ 55.1-900 et seq.) of Title 55.1.

F. A state bank that acts as a mortgage broker, as defined in § 6.2-1600, and that transacts business as a real estate brokerage through a controlled subsidiary corporation, is subject to subsection C of § 6.2-1616; however, a state bank that, pursuant to an executed originating agreement with the Virginia Housing Development Authority, acts or offers to act as an originating agent of the Virginia Housing Development Authority in connection with a mortgage loan shall not be deemed to be acting as a mortgage broker with respect to such mortgage loan but shall be deemed to be acting as a mortgage lender with respect to such mortgage loan, notwithstanding that the Virginia Housing Development Authority is or would be the payee on the note evidencing such mortgage loan and that the Virginia Housing Development Authority provides or would provide the funding of such mortgage loan prior to or at the settlement thereof.

G. In the event of a violation of this section, the Commission may take such action as is authorized in accordance with § 6.2-946, including issuance of an order requiring the state bank to cease and desist the activity that violates this section and imposing penalties.

2003, cc. 536, 558, § 6.1-58.3; 2006, c. 422; 2010, c. 794; 2022, cc. 400, 401.

Article 10 - RESERVES

§ 6.2-889. Required reserves.

A. As used in this section, unless the context requires otherwise:

"Demand deposits" means all deposits the payment of which can be legally required in less than 30 days.

"Time deposits" means all deposits the payment of which cannot be legally required in less than 30 days.

B. Every bank shall maintain a reserve related to its demand deposits and to its time deposits. The reserve on:

1. Demand deposits shall consist of actual cash on hand and balances payable on demand, due from other solvent banks; and

2. Time deposits shall consist of actual cash on hand and balances payable on demand due from other solvent banks; provided that up to 100 percent of such reserve on time deposits may be in the form of short maturity general obligations of the United States, such maximum percentage to be fixed by the Commission.

C. The Commission shall by regulation establish from time to time the reserve requirements within the following limits:

1. On demand deposits: zero to 15 percent; and

2. On time deposits: zero to five percent.

D. The reserves required herein for each day shall be computed on the basis of average daily deposits covering a biweekly period, provided that shorter averaging periods may be fixed by regulation of the Commission.

E. Nothing herein shall be construed to relieve any bank which is a member of the Federal Reserve System from maintaining a reserve fund in accordance with the requirements applicable to such member banks.

Code 1950, § 6-52; 1966, c. 584, § 6.1-69; 1976, c. 658; 1981, c. 65; 2010, c. 794.

§ 6.2-890. Preferences by pledging assets.

A. No bank shall give preference to any depositor or creditor by pledging the assets of such bank, except as otherwise authorized by subsection B, or except to secure deposits of trust funds made pursuant to the provisions of § 6.2-1005 or 6.2-1057.

B. Notwithstanding the provisions of subsection A, any bank:

1. May deposit securities for the purpose of securing deposits of:

a. The United States government and its agencies;

b. The Commonwealth, any other state where the bank has a branch office, or any agency or political subdivision thereof;

c. Insolvent national bank funds as permitted under 12 U.S.C. § 192;

d. Proceeds of sale of United States obligations as permitted under 31 U.S.C. § 771; and

e. Bankruptcy funds deposited under the provisions of 11 U.S.C. § 345;

2. May deposit securities for the purpose of securing sureties on surety bonds furnished to secure deposits listed in subdivision 1, or may, in lieu of depositing such securities to secure deposits pursuant to subdivision 1 b, by its board of directors, adopt a resolution before such public funds are deposited therein, to the effect that, in the event of the insolvency or failure of such bank, such public funds thereafter deposited therein shall, in the distribution of the assets of such bank, be paid in full before any other depositors shall be paid deposits thereafter made therein. The adoption of such resolution shall be deemed to constitute an obligation binding on such bank;

3. Is authorized to pledge its assets as security for amounts of borrowed money which shall not, without the approval of the Commission given in advance in writing, exceed in the aggregate the amount of the capital, surplus, and undivided profits of such bank actually paid in or earned and remaining undiminished by losses or otherwise. The amount of assets pledged for the security of such a loan shall not, without such approval, exceed 150 percent of the amount borrowed. No loan in excess of the amount so permitted made to any such bank shall be invalid or illegal as to the lender, even though made without the consent of the Commission. Rediscounting with or without guarantee or endorsement of notes, drafts, bills of exchange, or loans is hereby authorized and shall not be limited by the terms of this section, and shall not be considered as borrowed money within the meaning of this section;

4. Is authorized to borrow from a Federal Reserve Bank or a Federal Home Loan Bank and to rediscount with and sell to a Federal Reserve Bank or a Federal Home Loan Bank any and all notes, drafts, bills of exchange, acceptances, and other securities, and to give security for all money so borrowed and for all liabilities incurred by the discount of such notes, drafts, bills of exchange and other securities without restriction in like manner and to the same extent as national banks may lawfully do under the acts of Congress and regulations of the Board of Governors of the Federal Reserve System and the Federal Housing Finance Board; and

5. Is authorized to pledge its assets in connection with qualified financial contracts, which transactions shall be governed by this subdivision and not subdivision 3. The amount of assets pledged for obligations under such contracts shall not exceed 150 percent of the amount of the obligations, without the consent of the Commission, and the qualified financial contract shall be in writing and approved by the board of directors of such bank or an appropriate committee, which approval shall be reflected in the minutes of such board or committee. At the time any qualified financial contracts consisting of retail repurchase agreements are sold by a state bank, the market value of the underlying security must be at least equal to the amount of the aggregate purchase price paid by the purchasers of the retail repurchase agreements. As used in this subdivision, "qualified financial contract" means a qualified financial contract as defined in 12 U.S.C. § 1821 (e)(8)(D)(i), as the same may be amended, and any contract or transaction that the Commissioner determines to be a qualified financial contract for purposes of this section.

Code 1950, §§ 6-64, 6-65, 6-66; 1966, c. 584, §§ 6.1-78, 6.1-79, 6.1-80; 1974, c. 665; 1982, cc. 112, 411; 1989, c. 376; 1993, c. 182; 1994, c. 7; 1996, c. 306; 2010, c. 794; 2013, c. 205.

§ 6.2-891. Perfection of certain security interests.

When securities are sold by a bank subject to an obligation of repurchase, any security interest or interest of ownership therein may be perfected:

1. As specified by Title 8.8A or Title 8.9A;

2. By designation to the person holding physical custody thereof, which shall include a person keeping the master records, in case of securities identified by book entry only, that certain securities identified by serial number or dollar amount are held for the benefit of third parties other than the bank, who may, but need not, be identified by name; or

3. By physical separation on the premises of the bank in a separate drawer, compartment, or other facility. The bank may, from time to time, instruct any third party holding such securities that the previously identified securities or an amount of such securities previously identified as pledged or belonging to third parties have been released from such pledge by payment of all or part of the amount due, or have been repurchased. The records of the bank shall identify the persons who are pledgees or owners of such securities. Book-entry securities held in a bank's customer-safekeeping account, used for the same purpose, at the Federal Reserve Bank, notwithstanding that other customer securities are held in the same account, shall be deemed in compliance with subdivision 2, provided such securities are identified in the bank's records as required by this section.

1982, c. 429, § 6.1-81; 1983, c. 250; 1986, c. 320; 2010, c. 794.

§ 6.2-892. Federal deposit insurance a credit towards certain required bonds.

If a bank is required by the laws of the Commonwealth to furnish or deposit a surety bond or securities as security for the payment of any funds deposited in the bank, other than funds received or held in the trust department of the bank awaiting investment or distribution, the amount of the penalty of such bond or the amount of such securities shall be as required by law, less the amount of such deposit that, to the satisfaction of the body, officer, or other person responsible for seeing that a surety bond or amount of securities is furnished as security for such deposit, is insured under the provisions of § 12-b of the Federal Reserve Act, as amended, or any amendments thereto.

Code 1950, § 6-70; 1966, c. 584, § 6.1-83; 2010, c. 794.

Article 11 - DEPOSIT ACCOUNTS

§ 6.2-893. Payment of balance of deceased person or person under disability.

Any bank may pay any balance on deposit to the credit of any deceased person or of any person under disability, to the personal representative, curator, conservator, or committee of such person upon a letter of qualification as such personal representative, curator, conservator or committee, issued by an appropriate court. The letter shall be sufficient authority for such transfer. Any such bank making such transfer shall no longer be liable for such deposit to any person. The presentation of a duly certified letter of qualification as personal representative, curator, conservator, or committee shall be conclusive proof of the jurisdiction of the court issuing the same. Payment to a fiduciary qualified under the law of a state other than the Commonwealth shall be in accordance with Article 2 (§ 64.2-1426 et seq.) of Chapter 14 of Title 64.2 and § 64.2-609.

Code 1950, § 6-53; 1966, c. 584, § 6.1-70; 1983, c. 487; 1997, c. 801; 2010, c. 794.

§ 6.2-894. Deposits in and withdrawals from accounts of convicts.

A. Notwithstanding the provisions of Chapter 11 (§ 53.1-221 et seq.) of Title 53.1, a person convicted of a felony and sentenced to confinement in a state correctional institution for one year or longer, with the written consent of the Director of the Department of Corrections, may have a bank account, free from control of all persons except the Director of the Department of Corrections and a committee appointed pursuant to the provisions of § 53.1-221. A deposit made in a bank account by a convict shall be held for the exclusive right and benefit of the convict. The check, order, or receipt of the convict shall be a complete and sufficient release and discharge for any payments made from the deposit in the bank, until the bank is notified in writing by a duly qualified committee or the Director of the Department of Corrections not to permit further withdrawals from that account.

B. Upon receipt of such written notice or commencing on the banking day following the date of receipt of such written notice, the bank shall not permit further withdrawal, except with the consent of the committee or the Director of the Department of Corrections. A bank may further accept, pay or collect items on account for proceeds of collection of a bank account of a convict, despite his conviction or confinement or the bank's knowledge thereof, until it receives written directions to the contrary from the committee of such convict or the Director of the Department of Corrections.

1982, c. 593, § 6.1-70.1; 2010, c. 794.

§ 6.2-895. Repealed.

Repealed by Acts 2010, c. 269, cl. 2.

§ 6.2-896. Deposits of minors.

A bank may establish a deposit account for a minor as the sole and absolute owner of such account. The bank may receive deposits by or for such minor, honor any withdrawal request of the minor, and act in any other manner with respect to such account on the minor's order. Any payment or delivery of funds from such account to the minor, or the payment of a check or other written order for withdrawal of funds signed by such minor owner, shall be a valid and sufficient release and discharge of such bank for any payment or delivery so made. The parent or guardian of such minor shall not in his capacity as parent or guardian have the power to withdraw or transfer funds in any such account unless the minor has given written notice to the bank to accept the signature of such parent or guardian.

Code 1950, § 6-56; 1966, c. 584, § 6.1-74; 2009, c. 197; 2010, c. 794.

§ 6.2-897. Bank need not inquire as to fiduciary funds deposited in fiduciary's personal account.

If any fiduciary or agent makes a deposit in a bank to his personal credit of checks drawn by him upon an account in his own name as fiduciary, or of checks drawn by him upon an account in the name of his principal, if he is empowered to draw checks thereon, or of checks payable to his principal and endorsed by him as fiduciary, the bank receiving the deposit:

1. Shall not be required to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary; and

2. Is authorized to pay the amount of the deposit or any part thereof upon the withdrawal by the fiduciary without being liable to the principal, unless the bank receives the deposit or pays the withdrawal with (i) actual knowledge that the fiduciary, in making such deposit or in making such withdrawal, is committing a breach of his obligation as fiduciary or (ii) knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith.

Code 1950, § 6-57; 1966, c. 584, § 6.1-75; 2010, c. 794.

Article 12 - EXAMINATIONS AND REPORTS

§ 6.2-898. Examinations.

The Commission, as often as it deems necessary in the public interest, shall examine or cause to be examined each bank incorporated under the laws of, and doing business in, the Commonwealth. Such examination shall be conducted at least once in every three-year period.

Code 1950, § 6-106; 1966, c. 584, § 6.1-84; 1976, c. 658; 1996, c. 80; 2010, c. 794.

§ 6.2-899. Examination of affiliates.

A. As used in this section, "affiliate" of any bank means any entity (i) of which such bank, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 percent of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions, (ii) of which control is held, directly or indirectly, through stock ownership or in any other manner, by the shareholders of such bank who own or control either a majority of the shares of such bank or more than 50 percent of the number of shares voted for the election of directors of such bank at the preceding election, or by trustees for the benefit of the shareholders of any such bank, or (iii) of which a majority of the directors, trustees, or other persons exercising similar functions are directors of such bank.

B. The Commission, in connection with the examination of any bank, may make or cause to be made such examination of the affiliates of the bank as shall be necessary to ascertain the financial condition of the bank and to disclose fully the relations between the bank and its affiliates and the effect of such relations upon the affairs of the bank.

Code 1950, § 6-107; 1966, c. 584, § 6.1-85; 2010, c. 794.

§ 6.2-900. Special examinations.

The Commission, when (i) written application made to it by the board of directors or by the stockholders representing two-fifths of the total outstanding capital stock of any bank incorporated under the laws of, and doing business in, the Commonwealth or (ii) in the judgment of the Commission it may be necessary for the protection of the public or of persons depositing or dealing with such bank, shall make or cause to be made a special examination of the bank. All expenses incident to such special examination may be charged to the bank so examined and shall be paid by the bank so charged.

Code 1950, § 6-108; 1966, c. 584, § 6.1-86; 1976, c. 658; 2010, c. 794.

§ 6.2-901. Assistance in making examinations.

A. Upon the making of any examination under the provisions of § 6.2-898, 6.2-899, or 6.2-900, the officers, directors and employees of the bank being examined or the affiliate of which is being examined, upon the demand of the person or officer designated to make such examination shall:

1. Give to such examiner full access to all the money, books, papers, notes, bills, and other evidences of debts due to the bank;

2. Disclose fully and accurately all indebtedness and liability thereof; and

3. Furnish all information that the examiner may deem necessary to a full investigation into the affairs of such bank.

B. The examiner shall have the right to examine, under oath, any and all of the directors, officers, clerks, and employees in any manner connected with the operation of any bank touching any matter or thing pertaining to the examination, and for that purpose shall have authority to administer oaths to them.

C. When any bank shall utilize an independent data processing service, the operations of such independent data processing firm and its records pertaining to any bank being examined shall be open to inspection by examiners. Access to such operations and information shall be a prerequisite to the use of such independent data processing services by any bank regulated hereunder.

D. The Commission may impose a civil penalty of not less than $25 but not exceeding $100 per day for each day of noncompliance upon any officer of any bank who it determines, in proceedings commenced in accordance with the Commission's Rules, has refused to give any examiner the information, or refuse to be sworn, as required by this section.

Code 1950, §§ 6-109, 6-128; 1966, c. 584, §§ 6.1-87, 6.1-114; 1974, c. 665; 1976, c. 658; 1988, c. 555; 1997, c. 142; 2010, c. 794.

§ 6.2-902. Notice of examination.

No prior or advance notice of any examination shall be given any bank or any of its directors, officers, or employees unless the Bureau determines that notice will facilitate and not diminish the effectiveness of an examination.

Code 1950, § 6-110; 1966, c. 584, § 6.1-88; 1976, c. 658; 1978, c. 14; 2010, c. 794.

§ 6.2-903. Revaluation of assets after examination.

If it appears to the Commission, from an examination of any bank, that any of the bank's assets are valued by the bank at an amount in excess of their fair and reasonable value, the Commission, after the bank has been given an opportunity for a hearing before the Commission, may require the bank to revalue the assets on the basis of their fair and reasonable value.

Code 1950, § 6-111; 1966, c. 584, § 6.1-89; 2010, c. 794.

§ 6.2-904. Report of examination; inspection and dissemination to directors.

A. When any bank is examined under the provisions of this article, a copy of the report of the examination, at any time after its completion, shall be open for inspection by the officers and directors of the bank. No other copies of the report of examination shall be made except as necessary for the inspection. The copies of the report made for officers and directors of the bank shall not be removed from the premises of the bank. The other such copies shall be destroyed after the inspection has been completed. The original examination report shall be retained in the records of the Bureau.

B. Upon resolution of the board of directors of the bank, the report, at any time during the established period, may be inspected in the bank by the officers and directors of any other bank or by any other person designated in the resolution.

Code 1950, § 6-112; 1966, c. 584, § 6.1-90; 1976, c. 658; 1992, c. 224; 2010, c. 794.

§ 6.2-905. Communications to board or executive committee.

Each official communication directed by the Commission or any state bank examiner to any bank, or to any officer thereof, relating to an examination or investigation made or caused to be made by the Commission, or containing suggestions or recommendations as to the conduct of the bank, shall, if required by the Commission or examiner submitting the communication, be submitted by the officer or director of the bank receiving it, to the executive committee or board of directors of the bank. The communication shall be duly noted in the minutes of the meeting of the board or executive committee.

Code 1950, § 6-119; 1966, c. 584, § 6.1-91; 2010, c. 794.

§ 6.2-906. Disclosure of irregularities; Commission's powers.

A. If upon the examination of any bank, the Commission ascertains that the banking laws of the Commonwealth are not being fully observed, that any irregularities are being practiced, or that the bank's capital has been or is in danger of being impaired, the Commission shall give immediate notice thereof to the officers and directors of the bank. In addition, if it is deemed necessary in order to conserve the assets of such bank or to protect the interests of depositors and creditors thereof, the Commission may do any one or more of the following:

1. Temporarily suspend the right of such bank to receive any further deposits;

2. Temporarily close such bank, for a period not exceeding 60 days, which period may be further extended for one or more 60-day periods as the Commission may deem necessary;

3. Require the officers and directors of the bank to liquidate its outstanding loans insofar as shall be required;

4. Require that any impairment of the capital stock be made good;

5. Require that any irregularities be promptly corrected;

6. Require the bank to make reports, daily or at such other times as may be required to the Commission, as to the results achieved in carrying out the orders of the Commission; and

7. Without examination, close, for such period as the Commission may deem necessary, any bank facing an emergency due to withdrawal of deposits or otherwise, or, without closing such bank, grant to it the right to suspend or limit the withdrawal of deposits, for such period as the Commission may determine.

B. If any bank fails or refuses to comply with any such order of the Commission, or if the Commission shall determine that a receiver for any such bank should be appointed, the Commission may apply for the appointment of a receiver to take charge of the business affairs and assets of the bank and to wind up its affairs as provided in this chapter.

Code 1950, § 6-113; 1966, c. 584, § 6.1-92; 1976, c. 658; 2010, c. 794.

§ 6.2-907. Reports of condition and other statements.

A. Every bank shall make to the Commission statements of its financial condition at such times as the Commission may require. Such statements shall be (i) made in accordance with forms prescribed by the Commission, (ii) certified under oath by the president or cashier of the bank, or, if there is no cashier, by the treasurer, and (iii) attested by at least three of its directors.

B. The Commission shall require all banks doing business in the Commonwealth to make the statements described in subsection A, and at the time prescribed. The Commission shall prepare such forms as may be necessary to carry out the provisions of this section.

C. Whenever the Commission calls for statements, it shall forward to each such bank two forms, one of which, after being properly filled out and certified as required by subsection A, shall be returned to the Commission within a time prescribed by the Commission. The other form, filled out in like manner, shall be filed with the records of the bank. The Commission shall allow banks to submit such statements electronically. Any bank that submits such statements electronically shall maintain a copy of the statement with the required certified signatures affixed.

D. The Commission may require any bank to prepare and submit such other reports and material as it deems necessary to protect and promote the public interest.

E. The Commission may impose a civil penalty of not less than $100 but not exceeding $1,000 per day for each day of noncompliance upon any bank that it determines, in proceedings commenced in accordance with the Commission's Rules, has failed to comply with any of the provisions of this section, for a period of longer than 30 days, after being called upon by the Commission for a statement, or to do such other act as is herein provided.

Code 1950, §§ 6-105, 6-128; 1966, c. 584, §§ 6.1-93, 6.1-114; 1974, c. 665; 1976, c. 658; 1977, c. 257; 1988, c. 555; 1995, c. 561; 1997, cc. 142, 407; 2010, c. 794.

§ 6.2-908. Fees for supervision and regulation and for certain examinations and investigations.

A. For the purpose of defraying the expenses of supervision and regulation of banks, the Commission shall assess against each bank an annual fee. A bank's annual fee shall be calculated according to a schedule set by the Commission. The schedule shall bear a reasonable relationship to the assets of various individual banks and to other factors relating to their respective costs for supervision, regulation, and examination.

B. The Commission shall also charge additional fees:

1. Of $330 per day per examiner during examinations for the supervision and regulation of trust departments;

2. Of $10,000 for investigating an application for a certificate of authority pursuant to § 6.2-816;

3. Of $1,800 for investigating an application for authority to establish a branch pursuant to § 6.2-831 or a facility pursuant to § 6.2-835;

4. Of $7,500 for investigating an application of merger. The Commission shall not be entitled to any further fees for investigating any application to retain existing branches of the applying banks as branches of the merged bank;

5. Of $1,000 for investigating an application for authority to change the location of an existing bank or branch bank; and

6. Of $2,000 for investigating an application for authority to exercise trust powers.

C. Notwithstanding the designation of the fees set forth in subdivisions B 1 through B 6, the Commission may reduce by regulation or order any fee, if the Commission concludes that there is a reasonable basis for doing so and that the reduction of the fee will not be detrimental to the effectiveness of the Bureau.

Code 1950, § 6-122; 1956, c. 176; 1966, c. 584, § 6.1-94; 1972, c. 195; 1973, c. 401; 1974, c. 184; 1976, cc. 554, 658; 1981, c. 520; 1982, c. 455; 1987, c. 172; 1992, c. 283; 1997, c. 141; 1998, c. 19; 2010, c. 794.

§ 6.2-909. Assessment and payment of fees; lien.

A. Except as provided in subsections B and C, all fees and charges assessed pursuant to § 6.2-908 shall be assessed against each bank by the Commission on or before July 1 of each year and shall be paid into the state treasury on or before the following July 31. The Commission shall mail the assessment to each bank on or before July 1 of each year.

B. Fees for investigating applications for a certificate of authority shall be paid before the investigation is made.

C. Fees for the examination of trust departments shall be paid into the state treasury within 30 days after the Commission notifies the bank of the amount of the fee.

D. All fees so assessed shall be a lien on the assets of the bank, and if not paid when due may be recovered in any court of the county or city in which such bank or institution is located having original jurisdiction of civil cases on motion of and in the name of the Commission.

Code 1950, § 6-123; 1956, c. 176; 1966, c. 584, § 6.1-95; 1984, c. 343; 2010, c. 794.

§ 6.2-910. Reduction of fees.

If the Commission is of the opinion that the amounts of the several charges and fees set forth in § 6.2-908 will produce more revenue than is required to cover the costs and expenses to be paid from such charges and fees, the Commission, in its discretion, may reduce on a pro rata basis the amount of such charges and fees.

Code 1950, § 6-124; 1966, c. 584, § 6.1-96; 2010, c. 794.

§ 6.2-911. Examination of national banks.

Every national bank that is now or may be designated as a state depository, so long as it acts as such, shall be subject to the examination provided for state banks, when, in the opinion of the State Treasurer, such examination is necessary for the protection of the Commonwealth. However, no fees or charges shall be imposed upon national banks for such examinations.

Code 1950, § 6-127; 1966, c. 584, § 6.1-99; 2010, c. 794.

Article 13 - RECEIVERSHIPS

§ 6.2-912. Definition.

As used in this article, "insolvent" or "insolvency" means incapable of meeting the current demands of creditors or having liabilities which, in total, exceed the book value of assets.

Code 1950, § 6-114; 1966, c. 584, § 6.1-100; 1983, c. 507; 2010, c. 794; 2018, c. 257.

§ 6.2-913. Closing bank; appointment of receiver.

A. If (i) any bank is approaching insolvency and no reasonable prospect for rehabilitation of the bank exists, (ii) the Commission deems it necessary with respect to any bank for the protection of the public interest, or (iii) any bank has a ratio of tangible equity to total assets that is equal to or less than two percent, the Commission (a) may close immediately the doors of the bank without any notice and (b) by its duly appointed agent shall take charge of the books, assets, and affairs of the bank until the appointment of a receiver as provided by law.

B. If a bank has been closed by the Commission, the Commission may proceed (i) to have a receiver for the closed bank appointed in accordance with § 6.2-916 or (ii) as provided in Article 14 (§ 6.2-925 et seq.) of this chapter.

Code 1950, § 6-114; 1966, c. 584, § 6.1-100; 1983, c. 507; 2010, c. 794; 2018, c. 257.

§ 6.2-914. Merger or transfer of assets of insolvent bank.

A. If the Commission finds that a bank is insolvent, that its merger into another bank is desirable for the protection of its depositors, and that an emergency exists, and, if the board of directors of such insolvent bank approves a plan of merger of such bank into another bank, (i) compliance with the requirements of § 13.1-718 shall be dispensed with as to such insolvent bank and (ii) the approval by the Commission of such plan of merger shall be the equivalent of approval by the holders of more than two-thirds of the outstanding shares of such insolvent bank for all purposes of Article 12 (§ 13.1-715.1 et seq.) of Chapter 9 of Title 13.1.

B. If the Commission finds that a bank is insolvent, that the acquisition of its assets by another bank is in the best interests of its depositors, and that an emergency exists, the Commission, with the consent of the boards of directors of both banks as to the terms and conditions of such transfer, including the assumption of all or certain liabilities, may enter an order transferring some or all of the assets of such insolvent bank to such other bank, in which event (i) compliance with the provisions of §§ 13.1-723 and 13.1-724 shall not be required and (ii) §§ 13.1-730 through 13.1-741 shall not be applicable to such transfer.

C. In the case either of a merger as provided in subsection A or of a sale of assets as provided in subsection B, the Commission shall provide that prompt notice of its finding of insolvency and of the merger or sale of assets be sent to the stockholders of record of the insolvent bank for the purpose of providing such shareholders an opportunity to challenge the finding that the bank is insolvent. The relevant books and records of such insolvent bank shall remain intact and be made available to such shareholders for a period of 30 days after such notice is sent. The Commission's finding of insolvency shall become final if a hearing before the Commission is not requested by any such shareholder within such 30-day period.

D. If, after such hearing provided in subsection C, the Commission finds that such bank was solvent, it shall rescind its order entered pursuant to subsection A or B and the merger or transfer of assets shall be rescinded. However, if after such hearing the Commission finds that such bank was insolvent, its order shall be final.

1975, c. 44, § 6.1-100.1; 1983, c. 507; 2005, c. 765; 2010, c. 794.

§ 6.2-915. Protection of state deposits upon insolvency.

If, upon the examination of any bank that is designated as a state depository, it appears to the Commission that the bank is insolvent or is unable to meet its obligations and the legal demands upon it in the ordinary course of its business, the Commission shall forthwith notify the State Treasurer, who shall discontinue further deposits therein of state funds and take such action as may be necessary to protect the deposits of the Commonwealth therein.

Code 1950, § 6-115; 1966, c. 584, § 6.1-101; 2010, c. 794.

§ 6.2-916. Appointment of receiver.

When, in the judgment of the Commission, it is necessary for the protection of the interests of the Commonwealth or of the depositors and creditors of any bank doing business in the Commonwealth, or of the creditors of any trust company doing business in the Commonwealth, the Commission shall apply to any court in the Commonwealth having jurisdiction to appoint receivers for the appointment of a receiver to take charge of the business affairs and assets, and to wind up the affairs and business, of any such bank or trust company (i) failing to comply with the requirements of the Commission or (ii) found upon examination to be insolvent or unable to meet its obligations and the legal demands made upon it in the ordinary course and conduct of its business.

Code 1950, § 6-116; 1966, c. 584, § 6.1-102; 2010, c. 794.

§ 6.2-917. Execution of powers of sale by receivers.

A. When any receiver is appointed under the provisions of this article for any bank authorized to do a trust business or for any trust company, the receiver may be empowered by the court by which he is appointed:

1. To act for and on behalf of such bank or trust company in the execution of any power of sale conferred upon such bank or trust company by any instrument;

2. When such sale is made, to execute, acknowledge and deliver for and on behalf of such bank or trust company such deed as may be proper under the provisions of such instrument for the conveyance of title to the property conveyed therein; and

3. Upon payment of the amount secured under any such instrument, to execute, acknowledge, and deliver for and on behalf of such bank or trust company a proper release deed for the property conveyed therein.

B. Any such sale made by such receiver and any such deed or release executed by him, when so authorized and empowered, shall be as effective and as binding as if the same had been made or executed by such bank or trust company before the appointment of such receiver.

C. All sales that have been made by any such receivers within the Commonwealth, and all such deeds and release deeds that have been executed by any such receivers within the Commonwealth under the authority of the court by which they were appointed, since June 19, 1936, shall be as effective and as binding as if the same had been made by such bank or trust company before the appointment of such receiver.

Code 1950, § 6-117; 1966, c. 584, § 6.1-103; 2010, c. 794.

§ 6.2-918. Rights and powers of receivers generally.

Any receiver appointed under the provisions of this article shall be and become assignee of the assets and property of the bank or trust company of which he has been appointed receiver, with power to prosecute and defend, in the name of the bank or trust company or in his name as such receiver or otherwise, in the Commonwealth or elsewhere, all such suits as may be necessary to wind up the affairs and business of such bank or trust company, and to appoint such agents or attorneys for any such purpose as the court may approve.

Code 1950, § 6-118; 1966, c. 584, § 6.1-104; 2010, c. 794.

§ 6.2-919. Interest on deposits; distribution of surplus remaining after payment of depositors.

When an appropriate court, on a proper application therefor, shall appoint a receiver for any bank or trust company, the court may prescribe and direct, by order or decree entered of record, that the rate of interest to be paid by the receiver upon the claims of depositors of the bank or trust company shall not exceed the current or contracted rate of interest paid by the state bank or trust company on deposits. In addition, the court may fix the interest to be so paid at such lower rate as the court may deem proper under all the circumstances of the case. In such event, the court shall also direct that any surplus remaining after the payment in full of the depositors, together with the interest thereon as so prescribed and fixed, shall be distributed pro rata among the shareholders of the bank or trust company as of the date of the appointment of the receiver.

Code 1950, § 6-69; 1966, c. 584, § 6.1-105; 2010, c. 794.

§ 6.2-920. Proceedings to bar certain claims against banks in liquidation.

If, in a suit having as its object the administration or liquidation of the assets of an insolvent bank or trust company operating in the Commonwealth, the court orders the payment to creditors of dividends on, or other payments of, claims as therein ascertained and established, and (i) the receiver or other person charged with making the ordered payment to creditors is unable to make the payment by reason of his inability to ascertain the address of any creditor, the failure of any creditor to apply to such disbursing official for payment when so directed by the order of the court, or any other similar reason; or (ii) a trustee engaged in the voluntary liquidation of the assets of an insolvent bank or trust company operating in the Commonwealth, by petition to an appropriate court in the locality wherein the principal office of the insolvent bank or trust company is located, alleges and shows to the satisfaction of the court his inability to make payment to creditors for any of the reasons specified in clause (i), the court, in its discretion, may enter an order directing its receiver or other person charged with the duty of making such payment, or the trustee, to publish at least twice in a newspaper having a general circulation in the locality where the suit or petition is pending a list of creditors to whom dividends or payments are due and unpaid and the amount thereof. The publication shall include a notice that any creditor therein named who fails to apply to the disbursing official for payment of the amount due him within six months from the date of the last publication of such notice will be barred from his right thereafter to receive payment of amounts then due and from participation in any future dividends or payments that may thereafter be ordered.

Code 1950, § 6-58; 1966, c. 584, § 6.1-106; 2010, c. 794.

§ 6.2-921. When publication of list of creditors unnecessary.

If any bank or trust company under the circumstances set forth in clause (i) or (ii) of § 6.2-920 is in liquidation for a period of more than 10 years, and more than five years have elapsed since the date of the entry of the last court order directing the payment to creditors of dividends on or other payments of claims as therein ascertained and established, then it shall be unnecessary to publish a list of creditors to whom dividends or payments are due and unpaid and the amount thereof. In such event, it shall only be necessary to publish a notice stating (i) the total amount of dividends ordered paid and unclaimed; (ii) that a list of such creditors may be seen at the office of the receiver, liquidating agent, or other disbursing officer; and (iii) that any creditor who fails to apply to such disbursing official for payment of the amount due him within six months from the date of the last publication of such notice shall be barred from his right thereafter to receive payment of amounts then due and from participation in any future dividends or payments that may thereafter be ordered.

Code 1950, § 6-59; 1966, c. 584, § 6.1-107; 2010, c. 794.

§ 6.2-922. When publication once in two newspapers sufficient.

If there are two or more newspapers having general circulation in the locality where a suit or petition described in § 6.2-920 is pending, the court, in its discretion, in lieu of the publication provided for therein or in § 6.2-921, may direct that the list of creditors and the notice, be published once in at least two of the newspapers having general circulation in the locality.

Code 1950, § 6-60; 1966, c. 584, § 6.1-108; 2010, c. 794.

§ 6.2-923. When claims barred.

After the lapse of six months from the date of the last publication of the notice prescribed by § 6.2-920, 6.2-921, or 6.2-922, the court shall enter an order barring the claims of all creditors who have not theretofore applied for payment of their claims. Thereafter, (i) no creditor who failed to apply for payment within such period shall bring or maintain any action, suit, or proceeding and (ii) no process shall issue, for the enforcement of any claim to dividends or payments previously ordered paid to such creditor. In addition, no such creditor shall participate in future dividends or payments thereafter ordered in the suit or petition to be paid. The court in which any such suit or petition is pending may, in its discretion, before final distribution and for good cause shown, reinstate any claim barred pursuant to the foregoing provisions of this section.

Code 1950, § 6-61; 1966, c. 584, § 6.1-109; 2010, c. 794.

§ 6.2-924. Power of receivers to contract for loans and make investments.

A. Any court in the Commonwealth that has jurisdiction to appoint receivers, in its discretion, may authorize any receiver appointed by such court for any bank or trust company, pursuant to the provisions of this article:

1. To apply and contract for a loan from any corporation or agency that is (i) organized or provided for by, or pursuant to, federal law and (ii) authorized, among other purposes, to make loans upon the application of the receiver or liquidating agent of any bank that is closed, or in process of liquidation, secured by the assets of any such bank, and if such loan is for the purpose of aiding in the reorganization or liquidation of any such bank, secured by the payment of liquidating dividends from the proceeds thereof; and

2. To secure any loan described in subdivision 1 by the pledge, hypothecation or mortgage of any or all of the assets of the bank or trust company, or in such other manner as such court, in its discretion, may authorize.

B. Any such court, in its discretion, also may authorize any receiver so appointed by it to invest any funds in the hands of such receiver in bonds of the United States or of the Commonwealth.

Code 1950, § 6-81; 1966, c. 584, § 6.1-110; 2010, c. 794.

Article 14 - APPOINTMENT OF FDIC AS RECEIVER

§ 6.2-925. Definitions.

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

"Bank" means any bank or trust company organized under the laws of the Commonwealth.

"FDIC" or "Corporation" means the Federal Deposit Insurance Corporation. The term includes any successor to the Corporation or any other agency or instrumentality of the United States that undertakes to discharge the purposes of the Corporation.

"Receivership court" means the circuit court that appoints a receiver for a bank pursuant to this article.

1983, c. 507, § 6.1-110.1; 2010, c. 794.

§ 6.2-926. Appointment of FDIC as receiver.

In any case where the Commission has closed and taken possession of a bank, the deposits in which are insured by the FDIC, the Commission may apply to the Circuit Court of the City of Richmond for the appointment of the FDIC as receiver. The court, if it finds that the FDIC is willing to accept the appointment, shall appoint the FDIC as receiver. Upon acceptance of the court's appointment of the FDIC as receiver, the FDIC shall not be required to post bond.

1983, c. 507, § 6.1-110.2; 2010, c. 794; 2018, c. 257.

§ 6.2-927. Transfer of title to bank assets.

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

1983, c. 507, § 6.1-110.3; 2010, c. 794.

§ 6.2-928. Posting of notice; effect of posting notice.

Immediately upon closing any bank with the intention of proceeding under the provisions of this article, the Commissioner shall post an appropriate notice of closing at the main entrance of the bank. Upon the posting of said notice, (i) no judgment lien, attachment lien, or voluntary lien shall thereafter attach to any asset of the bank and (ii) no director, officer, or agent of the bank thereafter shall have authority to act on behalf of the bank or to convey, transfer, assign, pledge, mortgage, or encumber any asset thereof.

1983, c. 507, § 6.1-110.4; 2010, c. 794.

§ 6.2-929. Powers of receiver.

The FDIC as 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 or liquidate its assets;

3. To execute in the name of the bank any instrument necessary or proper to effectuate its powers as receiver or perform its duties as such;

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 its appointment as receiver;

6. 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 subdivision and interest thereon shall be considered an expense of administration for purposes of § 6.2-933;

7. 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 FDIC as 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 (i) sell, lease, or exchange any and all real and personal property, (ii) compromise any debt, claim, or judgment due the bank, and (iii) discontinue any action or other proceeding pending therefor; and

9. Subject to the approval of the receivership court, to (i) pay off all mortgages, security deeds, security agreements, and liens upon any real or personal property belonging to the bank and (ii) purchase at judicial sale or sale authorized by court order any real or personal property in order to protect the bank's equity therein.

1983, c. 507, § 6.1-110.5; 2010, c. 794.

§ 6.2-930. Emergency sale of assets.

The FDIC as receiver, with ex parte approval of the receivership court, may sell all or any part of the closed bank's assets. All or any part of such assets may be sold to the Federal Deposit Insurance Corporation in its capacity as a corporation. The FDIC as receiver may also borrow from the FDIC, in its corporate capacity, any amount necessary to facilitate the assumption of deposit liabilities by an existing bank or a newly chartered bank, and may assign any part or all of the assets of the closed bank as security for such loan.

1983, c. 507, § 6.1-110.6; 2010, c. 794.

§ 6.2-931. Notice and proof of claim; notice of rejection of claim; petition for hearing.

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

1983, c. 507, § 6.1-110.7; 2010, c. 794.

§ 6.2-932. Payment of claims filed after prescribed period.

Any claim filed after the 180-day claim period prescribed by § 6.2-931, and subsequently accepted by the FDIC as 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 FDIC as receiver on the date such claim is accepted or allowed.

1983, c. 507, § 6.1-110.8; 2010, c. 794.

§ 6.2-933. Distribution of assets.

A. All claims against the bank's estate, proved to the satisfaction of the FDIC as receiver or approved by the receivership court, shall be paid in the following order:

1. Administration expenses of the liquidation;

2. Claims given priority under other provisions of state or federal law;

3. Deposit obligations;

4. Other general liabilities;

5. Debt subordinated to the claims of depositors and general creditors; and

6. Equity capital securities.

B. No interest on any claim shall be paid until all claims within the same class have received the full principal amount of claim.

1983, c. 507, § 6.1-110.9; 2010, c. 794.

§ 6.2-934. Receivership procedures involving assets held by closed bank as fiduciary.

The FDIC as 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, or in any other fiduciary or representative capacity. The successor's duties and obligations commence upon appointment and are to the same extent binding upon the former bank 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. Nothing in this section shall be construed to impair any right of the grantor or beneficiary of trust assets to secure the appointment of a substitute trustee or manager. Within 30 days after appointment, the successor shall (i) 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 and (ii) cause the fact of its appointment to be recorded in appropriate courts of record.

1983, c. 507, § 6.1-110.10; 2010, c. 794.

§ 6.2-935. Termination of executory contracts and leases; liability; extension of statute of limitations.

Within 180 days of the date of the closing of the bank, the FDIC as receiver at its election may reject (i) any executory contract to which the closed bank is party without further liability to the closed bank or the receiver or (ii) any obligation of the bank as a lessee of real or personal property. The receiver's election to reject a lease creates no claim (a) for rent other than rent accrued to the date of termination or (b) for actual damages, if any, for such termination, not to exceed the equivalent of six months' payment. Notwithstanding any other law of the Commonwealth, the statute of limitations shall be extended for a period of six months on all causes of action which may accrue to the FDIC as receiver.

1983, c. 507, § 6.1-110.11; 2010, c. 794.

§ 6.2-936. Subrogation to rights of bank depositors.

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 by the Federal Deposit Insurance Act (12 U.S.C. § 1811 et seq.) in the case of a national bank.

1983, c. 507, § 6.1-110.12; 2010, c. 794.

§ 6.2-937. Destruction of records.

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

1983, c. 507, § 6.1-110.13; 2010, c. 794.

Article 15 - BANKING OFFENSES

§ 6.2-938. Engaging in banking business without authority; Commission may examine accounts of suspected person; penalty.

A. Every person who trades or deals as a bank, or carries on banking, without authority of law, and their officers and agents, is guilty of a Class 6 felony.

B. The Commission shall have authority to examine the accounts, books, and papers of any person who it has reason to suspect is doing a banking business, in order to ascertain whether such person has violated, or is violating, any provision of this title. The refusal to submit such accounts, books, and papers shall be prima facie evidence of such violation.

Code 1950, § 6-133; 1966, c. 584, § 6.1-111; 1992, c. 136; 1994, c. 7; 2010, c. 794.

§ 6.2-939. Unlawful use of terms indicating that business is bank; penalty.

A. A person not authorized to engage in the banking business in the Commonwealth by the provisions of this title or under the laws of the United States, shall not (i) use any office sign having thereon any name or other words indicating that any such office is the office of a bank; (ii) use or circulate any letterheads, billheads, blank notes, blank receipts, certificates, circulars, or any written or printed paper, having thereon any name or word indicating that such person is a bank; or (iii) use the word "bank," "banking," "banker," or "trust," or the equivalent thereof in any foreign language, or the plural thereof in connection with any business other than a banking business.

B. The foregoing prohibitions shall not apply to use by a bank holding company, as defined in § 6.2-800, of the word "bank," "banks," "banking," "banker," "trust," or the equivalent thereof in its name, or of a name similar to that of a subsidiary bank of such bank holding company.

C. The use of the above-mentioned words in the name of, or in connection with, any other business shall not be prohibited if the context or remaining words show clearly and definitely that the business is not a bank, and is not carrying on a banking business.

D. Any person violating the provisions of this section, either individually or as an interested party, is guilty of a Class 6 felony.

Code 1950, § 6-134; 1966, c. 584, § 6.1-112; 1972, c. 187; 1992, cc. 24, 136; 2000, c. 56; 2003, c. 592; 2010, c. 794.

§ 6.2-940. Making derogatory statements affecting banks; penalty.

Any person who willfully and maliciously makes, circulates, or transmits to another any statement, rumor, or suggestion that is directly or by reference derogatory to the financial condition, or affects the solvency or financial standing of, any bank doing business in the Commonwealth, or who counsels, aids, procures, or induces another to start, transmit, or circulate any such statement or rumor, is guilty of a Class 1 misdemeanor.

Code 1950, § 6-132; 1966, c. 584, § 6.1-119; 1991, c. 710; 2010, c. 794.

§ 6.2-941. Use of bank name, logo, or symbol for marketing purposes; penalty.

A. As used in this section, "name, logo, or symbol, or any combination thereof, of a bank" includes any name, logo, or symbol, or any combination thereof, that is deceptively similar to the name, logo, or symbol, or any combination thereof of a bank.

B. Except as provided in subsection C, no person shall use the name, logo, or symbol, or any combination thereof, of a bank in marketing material provided to or solicitation of another person in a manner such that a reasonable person may believe that the marketing material or solicitation originated from or is endorsed by the bank or that the bank is responsible for the marketing material or solicitation.

C. This section shall not apply to (i) an affiliate or agent of the bank or (ii) a person who uses the name, logo, or symbol of a bank with the consent of the bank.

D. Any person violating the provisions of this section, either individually or as an interested party, is guilty of a Class 1 misdemeanor. This section shall not affect the availability of any remedies otherwise available to a bank.

2005, c. 240, § 6.1-119.1; 2010, c. 794.

§ 6.2-942. False certification of checks; penalty.

Any officer, employee, agent, or director of a bank who (i) certifies a check drawn on such bank and willfully fails forthwith to charge the amount thereof against the account of the drawer thereof or (ii) willfully certifies a check drawn on such bank when the drawer of such check does not have on deposit with the bank the amount of money subject to the payment of such check, is guilty of a Class 1 misdemeanor.

Code 1950, § 6-136; 1966, c. 584, § 6.1-120; 2010, c. 794.

§ 6.2-943. Offenses by officer, director, agent, or employee of bank; penalties.

A. Any officer, director, agent, or employee of any bank who embezzles, abstracts, or willfully misapplies any of the moneys, funds, or credits of, or in the possession or control of, the bank is guilty of larceny and subject to the penalties provided in § 18.2-95 or 18.2-96.

B. Any officer, director, agent, or employee of any bank who (i) issues or puts forth any certificate of deposit, (ii) draws any order or bill of exchange, (iii) makes any acceptance, (iv) assigns any note, bond, draft, bill of exchange, mortgage, judgment, decree, or other instrument in writing, or (v) makes any false entry in any book, report, or statement of such bank, with intent in any case to injure or defraud the bank or any other individual or entity, or to deceive any officer of the bank or the Commission, or any agent or examiner authorized to examine the affairs of the bank, and any person, who, with the same intent, aids or abets any such officer, director, agent, or employee of such bank in any act described in clauses (i) through (v), is guilty of a Class 5 felony.

C. Any officer of a bank who knowingly makes a false statement of the condition of any bank is guilty of a Class 5 felony.

Code 1950, §§ 6-128, 6-138; 1966, c. 584, § 6.1-122; 1974, c. 665; 2010, c. 794.

§ 6.2-944. Officers, directors, agents, and employees violating or causing bank to violate laws; civil liability not affected.

Any officer, director, agent, or employee of any bank who knowingly violates or who knowingly causes any bank to violate any provision of this chapter, or knowingly participates or knowingly acquiesces in any such violation, unless other punishment is provided for the offense of such officer, agent, or employee, is guilty of a Class 1 misdemeanor. The provisions of this section shall not affect the civil liability of any such officer, director, agent, or employee.

Code 1950, § 6-139; 1966, c. 584, § 6.1-123; 1974, c. 665; 2010, c. 794.

§ 6.2-945. Receiving deposit knowing bank to be insolvent; penalty.

A. Any officer, director. or employee of any bank, or broker, who takes and receives, or permits to be received, a deposit from any person with the actual knowledge that the bank or broker is at the time insolvent, is guilty of embezzlement. Notwithstanding the provisions of § 18.2-111, an individual convicted of embezzlement pursuant to this section shall be fined double the amount so received and be subject to a term of imprisonment of not less than one nor more than three years, in the discretion of the jury, for each offense.

B. On the trial of any indictment under this section, it shall be the duty of the bank or broker, and its agent or officers, to produce in court, on demand of the attorney for the Commonwealth, all books and papers of the bank or broker, to be read as evidence on the trial of such indictment. In determining the question of the solvency of any bank, the capital stock thereof shall not be considered as a liability due by it.

Code 1950, § 6-3; 1966, c. 584, § 6.1-124; 2010, c. 794.

§ 6.2-946. Civil penalties for violation of Commission's orders.

A. The Commission may impose, enter judgment for, and enforce by its process, a civil penalty not exceeding $10,000 upon any bank, or against any of its directors, officers, or employees, who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any lawful order of the Commission.

B. The Commission may remove from office any director or officer of a bank for a second or subsequent violation by him of any such order.

C. In all cases the defendant shall have an opportunity to be heard and to introduce evidence, and the right to appeal as provided by law.

1968, c. 791, § 6.1-125; 1974, c. 665; 1976, c. 658; 2010, c. 794.

Article 16 - VOLUNTARY REGULATORY SELF-ASSESSMENTS

§ 6.2-947. Definitions.

As used in this article, unless the context requires a different meaning:

"Bank" has the same meaning ascribed to the term in § 6.2-800 and includes any bank holding company, affiliates, and subsidiaries of a bank.

"Bank regulator" means any state, federal, or municipal governmental agency, bureau, commission, office, or other governmental entity charged with the regulation or supervision of a bank or the regulation or supervision of any activity in which a bank may be engaged. "Bank regulator" includes the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, the Federal Trade Commission, and the Bureau.

"Self-assessment" means (i) a bank's voluntary, self-initiated internal assessment, audit, or review of the bank and its practices, policies, and procedures or (ii) a bank's voluntary, self-initiated assessment, audit, or review of the practices, policies, and procedures of a person acting under contract, directly or indirectly, as the bank's service provider, including mortgage servicers and sub-servicers, credit and debit card processors, and providers of loan document systems.

"Self-assessment report" means any document, including any audit, report, finding, communication, or opinion or any draft of an audit, report, finding, communication, or opinion, prepared by internal personnel or by outside attorneys, accountants, or consultants as a part of or in connection with a self-assessment that is made in good faith.

2013, cc. 32, 148.

§ 6.2-948. Privilege for self-assessment reports.

Except as otherwise provided in this article:

1. A self-assessment report and any portion or contents thereof are privileged and are not admissible or subject to discovery in any civil or administrative litigation, action, proceeding, or investigation;

2. The self-assessment privilege shall be applicable regardless of whether a bank regulator or any other governmental authority in possession of a self-assessment report or any portion or contents thereof subsequently discloses it or any portion or contents thereof to a third party (i) in accordance with subsection B of § 6.2-101 or (ii) as required or permitted by any other state or federal law; and

3. Notwithstanding any state or federal law, a bank regulator or any other governmental authority in possession of a self-assessment report or any portion or contents thereof shall not disclose the report or any portion or contents thereof to a person in response to a request made pursuant to the Virginia Freedom of Information Act (§ 2.2-3700 et seq.) or any similar federal or state public records law.

2013, cc. 32, 148.

§ 6.2-949. Exceptions from self-evaluation privilege.

The self-assessment privilege established by § 6.2-948 shall not apply:

1. If a bank expressly waives the protections of the self-assessment privilege established by § 6.2-948;

2. If a bank discloses a self-assessment report to any third party, provided that disclosure of a self-assessment report to a third party shall not void or waive the self-assessment privilege with respect to such self-assessment report if such third party (i) is a bank regulator, (ii) is subject to an agreement or obligation to preserve the confidentiality of the self-assessment report, which agreement or obligation to preserve confidentiality need not be in writing and may be evidenced by an indication of confidentiality on the face of any such self-assessment report, a verbal agreement regarding its confidentiality, an employment relationship, a principal-agent relationship, a fiduciary relationship, or an attorney-client relationship, or (iii) receives the self-assessment report from a person described in clause (i) or (ii);

3. If a court or hearing officer, after an in camera review, determines that (i) the privilege is being asserted for a fraudulent purpose, (ii) the self-assessment report was prepared to avoid disclosure of information in an investigative, administrative, or judicial proceeding that was underway at the time of its preparation or for which the bank had been provided written notification that an investigation into a specific violation had been initiated, or (iii) the self-assessment report addresses a matter reasonably expected to have an imminent and substantial harm to bank customers or consumers and the bank has not previously taken reasonable actions to correct the matter; or

4. To any self-assessment report requested by a bank regulator, provided that disclosure of a self-assessment report to a bank regulator shall not void or waive the self-assessment privilege with respect to such self-assessment report, and provided further that disclosure of a self-assessment report by a bank regulator to any third party shall not void or waive the self-assessment privilege with respect to such self-assessment report.

2013, cc. 32, 148.

§ 6.2-950. Effect on other privileges.

Nothing in this article limits, waives, or abrogates the scope or nature of any statutory or common law privilege.

2013, cc. 32, 148.

Article 17 - BENEFITS CONSORTIUM

§ 6.2-951. Definitions.

As used in this article:

"Benefits consortium" means a trust that complies with the conditions set forth in § 6.2-952.

"ERISA" means the federal Employee Retirement Income Security Act of 1974 (P.L. 93-406, 88 Stat. 829), as amended.

"Sponsoring association" means an association (i) the members of which are banks and employers that provide products and services to banks, (ii) that is incorporated under the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.), (iii) that operates as a nonprofit entity under § 501(c)(6) of the Internal Revenue Code of 1986, (iv) that has been in existence for at least 20 years, and (v) that exists for purposes other than arranging for or providing health and welfare benefits to members. "Sponsoring association" includes any wholly owned subsidiary of a sponsoring association.

2014, cc. 220, 296.

§ 6.2-952. Conditions for a benefits consortium.

A trust shall constitute a benefits consortium when all of the following conditions exist:

1. The trust is subject to (i) ERISA and U.S. Department of Labor regulations applicable to multiple employer welfare arrangements and (ii) the authority of the U.S. Department of Labor to enforce such law and regulations;

2. A Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs), for the applicable plan year shall be filed with the U.S. Department of Labor identifying the arrangement among the trust, sponsoring association, and benefit plans offered through the trust as a multiple employer welfare arrangement;

3. The trust operates as a nonprofit voluntary employee beneficiary association within the meaning of § 501(c)(9) of the Internal Revenue Code of 1986;

4. The trust's organizational documents:

a. Provide that the trust is sponsored by the sponsoring association;

b. State that its purpose is to provide medical, prescription drug, dental, and vision benefits to employees of the sponsoring association and its members and the dependents of those employees through benefits plans;

c. Provide that the funds of the trust are to be used for the benefit of the participating employees, and their dependents, through insurance, self-insurance, or a combination thereof as determined by the trustee and for defraying reasonable expenses of administering and operating the trust and the benefits plans offered through the trust;

d. Limit participation in the benefits plans offered through the trust to employers that are the sponsoring association, members of the sponsoring association, and their affiliates;

e. Limit the benefits plans offered through the trust to benefits plans sponsored by the sponsoring association;

f. Grant the sponsoring association the power to appoint the trustee of the trust;

g. Provide the trustee with powers for the control and management of the trust; and

h. Require the trustee to discharge its duties with respect to the trust in accordance with the fiduciary duties defined in ERISA;

5. Five or more employers participate in the benefits plans offered through the trust;

6. The trust establishes and maintains reserves determined in accordance with sound actuarial principles;

7. The trust has purchased and maintains policies of specific, aggregate, and terminal excess insurance with retention levels determined in accordance with sound actuarial principles from insurers licensed to transact the business of insurance in the Commonwealth;

8. The trust has secured one or more guarantees or standby letters of credit guaranteeing the payment of claims under the benefits plans offered through the trust in an aggregate amount not less than (i) the trust's annual aggregate excess insurance retention level, minus (ii) the annual premium assessments for the benefits plans offered through the trust, minus (iii) the trust's net assets, which net assets amount shall be net of the trust's reasonable estimate of incurred but not reported claims; and such guarantees or letters of credit have been issued by (a) banks participating in the benefits plans offered through the trust or (b) qualified United States financial institutions as such term is used in subdivision 2 c of § 38.2-1316.4;

9. The trust has purchased and maintains commercially reasonable fiduciary liability insurance;

10. The trust has purchased and maintains a bond that satisfies the requirements of ERISA;

11. The trust is audited annually by an independent certified public accountant;

12. The trust does not include in its name the words "insurance," "insurer," "underwriter," "mutual," or any other word or term or combination of words or terms that is uniquely descriptive of an insurance company or insurance business unless the context of the remaining words or terms clearly indicates that the entity is not an insurance company and is not carrying on the business of insurance; and

13. The trust does not pay commissions or other remuneration to any person that is conditioned upon the enrollment of persons in any benefits plan offered by the trust.

2014, cc. 220, 296.

§ 6.2-953. Benefits consortium and sponsoring association not subject to regulation or taxation as an insurance company.

A. A benefits consortium shall not be subject to:

1. The provisions of Title 38.2 and regulations adopted thereunder, including those provisions and regulations otherwise applicable to multiple employer welfare arrangements; or

2. The tax levied on insurance companies pursuant to § 58.1-2501.

B. The sponsoring association of a benefits consortium or any of its subsidiaries shall not, by virtue of its sponsorship of the benefits consortium or the benefits plans offered through the benefits consortium, be subject to any provisions or regulations described in subdivision A 1 or any tax described in subdivision A 2.

2014, cc. 220, 296.

Chapter 10 - Entities Conducting Trust Business

Article 1 - Trust Powers and Trust Business

§ 6.2-1000. Definitions.

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

"Affiliated trust company" means a trust company that is controlled by a trust company holding company.

"Trust business" means the holding out by a person or legal entity to the public at large by advertising, solicitation or other means that the person or legal entity is available to act as a fiduciary in the Commonwealth or is accepting and undertaking to perform the duties of a fiduciary in the regular course of its business. A person does not engage in trust business by:

1. Rendering services as an attorney at law, either individually or through an entity wholly owned by attorneys at law, in the performance of duties as a fiduciary;

2. Rendering services as a certified or registered public accountant in the performance of duties as such;

3. Acting as trustee under a deed of trust made only as security for the payment of money or for the performance of another act;

4. Acting as a trustee in bankruptcy or as a receiver;

5. Holding trusts of real estate for the primary purpose of subdivision, development or sale, or to facilitate any business transaction with respect to such real estate;

6. Engaging in the business of an escrow agent;

7. Holding assets as trustee of a trust created for charitable purposes if:

a. The trustee is an entity exempt from federal income tax under § 501(c) (3) of the Internal Revenue Code; and

b. The trust is (i) exempt from federal income taxes under § 501(c) (3) of the Internal Revenue Code; (ii) a charitable remainder trust described in § 664 of the Internal Revenue Code; (iii) a pooled income fund described in § 642(c) (5) of the Internal Revenue Code; or (iv) a trust the charitable interest in which is either a guaranteed annuity or a fixed percentage distributed yearly of the fair market value of the trust property, described in § 2055(e) (2) (B) or § 2522(c) (2) (B) of the Internal Revenue Code;

8. Receiving rents and proceeds of sale as a licensed real estate broker on behalf of the principal; or

9. Engaging in securities transactions as a broker-dealer or salesman.

"Trust company" means a corporation, including an affiliated trust company, that is authorized to engage in the trust business under Article 2 (§ 6.2-1013 et seq.) of this chapter, the powers of which are expressly restricted to the conduct of trust business.

"Trust company holding company" means a corporation that controls a trust company. A trust company holding company shall not be deemed a financial institution holding company for any purpose under this title unless it controls a financial institution other than an affiliated trust company or another financial institution holding company.

"Trust institution" means any (i) bank authorized to engage in the trust business, (ii) trust company, or (iii) trust subsidiary.

"Trust subsidiary" or "subsidiary trust company" means a corporation organized under Chapter 9 (§ 13.1-601 et seq.) of Title 13.1, or an association organized under the National Banking Act with its main office located in the Commonwealth, that is authorized to transact trust business and business incidental thereto, but not to accept deposits except as incidental to such trust business.

1974, c. 286, § 6.1-32.2; 1991, c. 282; 1993, c. 432, §§ 6.1-32.11, 6.1-32.12; 1994, c. 524; 1995, c. 140; 1997, c. 801; 2001, c. 717; 2004, c. 781; 2010, c. 794; 2022, c. 323.

§ 6.2-1001. Entities authorized to engage in trust business.

A. No entities, except (i) corporations duly chartered and already conducting trust business in the Commonwealth under authority of the laws of the Commonwealth or the United States, (ii) banks hereafter incorporated under the laws of the Commonwealth that are authorized to engage in the trust business through a separate trust department pursuant to Article 3 (§ 6.2-819 et seq.) of Chapter 8, (iii) corporations authorized to engage in the trust business in the Commonwealth under the banking laws of the United States, including any national bank or federal savings bank described in clause (ii) of subsection B of § 6.2-1067, (iv) trust companies authorized to establish and operate one or more trust offices or engage in trust business in the Commonwealth under Article 2 (§ 6.2-1013 et seq.), (v) trust subsidiaries authorized to engage in trust business under Article 3 (§ 6.2-1047 et seq.), (vi) multistate trust institutions authorized to engage in trust business under Article 4 (§ 6.2-1065 et seq.), (vii) private trust companies authorized to engage in trust business under Article 5 (§ 6.2-1074 et seq.), or (viii) savings institutions authorized to engage in the trust business pursuant to Article 6 (§ 6.2-1081 et seq.), shall engage in the trust business in the Commonwealth. No foreign corporation, except as permitted in Chapter 7 (§ 6.2-700 et seq.), shall engage in trust business in the Commonwealth.

B. Nothing in this chapter shall prevent:

1. A natural person from qualifying and acting as trustee, personal representative, guardian, conservator, committee, or in any other fiduciary capacity;

2. Any person from (i) lending money on real estate and personal security or collateral, (ii) guaranteeing the payment of bonds, notes, bills and other obligations, or (iii) purchasing or selling stocks and bonds;

3. Any bank or trust company organized under the laws of the Commonwealth from qualifying and acting in another state as trustee, personal representative, guardian of a minor, conservator, or committee or in any other fiduciary capacity, when permitted so to do by the laws of such other state; or

4. An incorporated association that is authorized to sell burial association group life insurance certificates in the Commonwealth, as described in the definition of limited burial insurance authority in § 38.2-1800, the principal purpose of which is to assist its members in (i) financial planning for their funerals and burials and (ii) obtaining insurance for the payment, in whole or in part, for funeral, burial, and related expenses, from serving as trustee of a trust established pursuant to § 54.1-2822.

C. Nothing in this section shall be construed:

1. To prevent any bank or trust company organized in the Commonwealth and chartered under the laws of the United States from transacting business in the Commonwealth; or

2. To prevent a real estate broker as defined in § 54.1-2100 from owning or operating a bank provided that the requirements of this chapter are met.

D. Except as permitted by this chapter or by Article 3 (§ 6.2-819 et seq.) of Chapter 8, or by federal law in the case of a national bank or federal savings bank described in clause (ii) of subsection B of § 6.2-1067, no entity shall qualify or act (i) as a personal representative of a deceased person; (ii) as a guardian for an infant or an incapacitated person; (iii) as a committee; (iv) as a conservator for an incapacitated person; (v) as a testamentary trustee, or trustee for any other trust if required by law to account to the commissioner of accounts of a circuit court in the Commonwealth; or (vi) in any other fiduciary capacity required to account to the commissioner of accounts of a circuit court in the Commonwealth.

Code 1950, § 6-9; 1966, c. 584, § 6.1-5; 1974, c. 286, § 6.1-32.5; 1985, c. 544; 1995, c. 301; 1997, c. 801; 1999, c. 835; 2003, cc. 536, 558, 910; 2007, c. 621; 2010, c. 794; 2011, c. 67; 2012, c. 608.

§ 6.2-1002. Powers of trust institutions.

A. All banks that are authorized to do a trust business and all trust companies shall have the following rights, powers, and privileges, and shall be subject to the following regulations and restrictions:

1. To act as agent for any person, corporation, municipality, or state, for the collection or disbursement of interest, or income or principal of securities;

2. To act as the fiscal or transfer agent of any state, municipality, or body politic or corporate, and in such capacity to receive and disburse money; to transfer, register, and countersign certificates of stock, bonds, or other evidences of indebtedness;

3. To act as agent of any corporation, foreign or domestic, for any lawful purpose;

4. To act as trustee under any mortgage or bond issued by an individual, municipality, or body politic or corporate, and to accept and execute any other municipal or corporate trust not inconsistent with the laws of the Commonwealth;

5. To act as guardian, receiver, or trustee of the estate of any minor and as depository of any money paid into court, whether for the benefit of any minor or other person;

6. To take, accept, and execute any and all such lawful trusts, duties, and powers in regard to the holding and management and disposition of any estate, real and personal, and the rents and profits thereof, or the sale or lease thereof, as may be granted or confided to it by any circuit court, judge, or clerk, or by any person, corporation, municipality, or other authority, and it shall be accountable to all parties in interest for the faithful discharge of every such trust, duty, or power which it may so accept;

7. To take, accept, and execute any and all such trusts and powers, of whatever nature and description, as may be conferred upon or entrusted or committed to it by any person, including any body politic or corporate or other authority, by grant, assignment, transfer, devise, bequest, or otherwise or as may be entrusted or committed or transferred to it or vested in it by order of any circuit court, judge, or clerk, and to receive and hold any property or estate, real or personal, which may be the subject of any such trust; and

8. To act as:

a. Executor under the last will and testament or administrator of the estate of any deceased person, under appointment of any circuit court, judge, or clerk thereof, having jurisdiction of the estate of such deceased person;

b. Guardian of the person or of the estate of any infant, guardian or conservator of any incapacitated person, habitual drunkard, or person who by reason of advanced age or impaired health or physical disability has become mentally or physically incapable of taking proper care of his person or properly handling and managing his estate, under appointment of any circuit court, judge, or clerk thereof, having jurisdiction of the estate of such person; or

c. Trustee or committee for any convict in the penitentiary, under appointment of any circuit court, judge, or clerk thereof, having jurisdiction of the estate of such person.

B. Nothing in this section shall ever be construed as authorizing the creation of a trust not lawful as between individuals nor to prohibit the deposit of funds by court and fiduciaries in banks of deposit and discount and savings banks.

C. Every trust company doing business in the Commonwealth is authorized temporarily to suspend its usual business during a period of actual or threatened enemy attack, civil insurrection, or riot, affecting the community in which such institution is doing business or other emergency justifying temporary closing, such as fire, flood, or hurricane.

Code 1950, §§ 6-30, 6-94, 6-104; 1966, c. 584, §§ 6.1-12, 6.1-17; 1970, c. 15; 1974, c. 286, § 6.1-32.10; 1984, c. 172; 1993, c. 432; 1997, c. 801; 2010, c. 794.

§ 6.2-1003. When security not required; payment of probate taxes and fees.

A. No bank or trust company with a minimum unimpaired capital stock of $50,000 or more shall be required by any officer or court of the Commonwealth to (i) give security upon appointment to or acceptance of any office of trust which it may, by law, be authorized to execute or (ii) give security upon any bond given pursuant to § 19.2-386.6 or similar statute; however, no bank or trust company shall qualify on an estate having a value in excess of its combined unimpaired capital and surplus without giving bond for such excess.

B. When such bank or trust company shall qualify on any office of trust, the clerk in lieu of collecting the fees under Title 17.1 and probate taxes may render a bill or statement to the bank or trust company to be paid within five business days.

Code 1950, § 6-95; 1966, c. 584, § 6.1-18; 1988, c. 348; 1993, c. 866; 2010, c. 794; 2012, cc. 283, 756.

§ 6.2-1004. Who may take oath for corporate fiduciary.

In all cases where any trust institution shall be appointed to act as trustee, executor, or administrator of any estate or guardian for any infant, or in any other fiduciary capacity, it shall be lawful for any officer of the trust institution to take and subscribe for the institution any and all oaths required to be taken or subscribed by such executor, administrator, trustee, guardian, or other fiduciary.

Code 1950, § 6-96; 1966, c. 584, § 6.1-19; 1974, c. 665; 2010, c. 794.

§ 6.2-1005. Deposit or other use of trust funds.

A. Funds received or held in the trust department of a bank or by a trust company awaiting investment or distribution shall not be used by the bank or trust company in the conduct of its business.

B. Notwithstanding subsection A, such funds may be deposited by a bank in its commercial or savings department to the credit of its trust department, if the bank first delivers to the trust department, as collateral security therefor, securities of any of the following classes:

1. Bonds, notes, or certificates of indebtedness of the United States;

2. Other readily marketable securities of the classes in which fiduciaries are authorized or permitted to invest trust funds, as set forth in § 64.2-1502; or

3. Other readily marketable bonds, notes, or debentures, commonly known as investment securities, meeting the following requirements:

a. That the issue be of a sufficiently large total to make marketability possible;

b. Such a public distribution of the securities must have been provided for or made in a manner to protect or insure the marketability of the issue; and

c. That the trust agreement under which the security is issued provides for a trustee independent of the obligor, which trustee must be a trust institution.

C. The securities deposited as collateral pursuant to subsection B shall be owned by the bank and shall at all times be at least equal in market value to the amount of trust funds so used in the conduct of the business of the bank less such amount thereof as shall be insured by the Federal Deposit Insurance Corporation under existing or future federal law.

D. In the event of the failure or liquidation of such bank, the owners of the funds held in trust for investment shall have a lien on the bonds or other securities so set apart in addition to their claim against the estate of the bank.

Code 1950, § 6-99; 1966, c. 584, § 6.1-21; 1992, c. 810; 1993, c. 432; 1994, c. 7; 2010, c. 794.

§ 6.2-1006. Custody of trust securities to be kept separate; federal securities and obligations.

A. The securities and investments held in each trust shall be kept separate and distinct from the securities owned by the trust institution. The trust institution shall at all times show upon its trust records the interests of each separate fiduciary account and trust in each particular security or investment held by it in a fiduciary capacity. Trust securities and investments shall be placed in the joint custody or control of two or more officers or other employees designated by the board of directors of the trust institution. Such joint custody shall be interpreted to mean that neither of such officers or employees shall have access alone at any time to such securities and investments. All such officers and employees shall be bonded.

B. Securities and obligations of the United States and of agencies of the United States government may be held for the account of the trust institution by a Federal Reserve Bank in a book-entry custody account, without the requirement of the trust institution having physical possession of such securities, provided at all times that the records of the Federal Reserve Bank and the trust institution shall at all times identify separately those securities held for the account of the trust institution and those held by the trust institution in a fiduciary capacity.

Code 1950, § 6-100; 1966, c. 584, § 6.1-22; 1968, c. 59; 1974, cc. 75, 665; 2010, c. 794.

§ 6.2-1007. Investment of trust funds.

A. Funds received or held by a trust institution awaiting investment or distribution shall be invested or distributed as soon as practicable and shall not be held uninvested by the trust institution any longer than is reasonably necessary.

B. If the instrument creating the trust does not specify the character or class of investments to be made, and does not expressly grant to the trust institution, its officers or directors discretion in the matter of investments, funds held in trust shall be invested in any securities in which corporate or individual fiduciaries may lawfully invest.

C. If the instrument under which a trust institution is serving as fiduciary or cofiduciary does authorize it to retain:

1. Its own stock or securities, it shall be authorized to retain in like manner the stock or securities of a bank holding company of which it is a subsidiary; or

2. The stock or securities of a bank or trust company to the business of which the fiduciary has succeeded, or the stock or securities of a bank or trust company which has become a subsidiary of a bank holding company, such fiduciary shall be authorized in like manner to retain the stock of the successor bank or trust company or bank holding company.

Code 1950, §§ 6-98, 6-101; 1966, c. 584, § 6.1-23; 1972, c. 740; 1974, c. 665; 1993, c. 432; 2010, c. 794.

§ 6.2-1008. Dealings with self or affiliates.

A. No trust institution shall buy any property for a trust or estate from itself, or a department or branch thereof, or from an affiliate or subsidiary corporation, or from a director, officer, or employee of such trust institution. Any such purchase shall be voidable at the election of any beneficiary or successor trustee, unless (i) approved by an appropriate court, (ii) consented to by all beneficiaries after full and fair disclosure, (iii) authorized by the instrument creating the fiduciary relationship, or (iv) permitted by ruling of the Commissioner.

B. A sale of any trust or fiduciary property by a trust institution to itself, or a department or branch of such trust institution, or to an affiliate or subsidiary corporation, or to a director, officer, or employee of such trust institution, except as (i) approved by an appropriate court, (ii) consented to by all beneficiaries after full and fair disclosure, (iii) authorized by the instrument creating the fiduciary relationship, or (iv) permitted by ruling of the Commissioner, shall be a breach of trust and voidable at the election of any beneficiary or successor trustee.

C. Notwithstanding the provisions of subsections A and B, a trust institution, as fiduciary of one estate or trust, may buy or sell from or to itself, as fiduciary of another estate or trust, assets which at the time of sale are permissible fiduciary investments under Part A (§ 64.2-1200 et seq.) of Subtitle IV of Title 64.2, if the transaction is fair to both estates or trusts and is not prohibited by the terms of any instrument under which the fiduciary is acting.

Code 1950, § 6-102; 1966, c. 584, § 6.1-24; 1974, c. 665; 1991, c. 252; 2010, c. 794.

§ 6.2-1009. Common trust and collective investment funds.

A. As used in this section:

"Common trust fund" means a common trust fund described under § 584 of the Internal Revenue Code of 1986, as amended, as well as any other type of collective investment fund that is exempt from federal income taxation under any other provision of the Internal Revenue Code or regulations issued pursuant thereto.

"Maintaining bank" means a trust institution that establishes and maintains a common trust fund for the collective investment of qualified employee benefit trusts or funds held in a fiduciary capacity by it, including agency accounts under which the institution exercises investment discretion and assumes fiduciary responsibilities.

"Participating bank" means a trust institution duly authorized to act as a fiduciary, wherever located, that is owned, controlled by, or affiliated with (i) a maintaining bank or (ii) a bank holding company that also owns, controls, or is affiliated with a maintaining bank.

B. Any trust institution may establish and maintain one or more common trust funds for the collective investment of qualified employee benefit trusts or funds held in a fiduciary capacity by it, including agency accounts under which the institution exercises investment discretion and assumes fiduciary responsibilities.

C. The maintaining bank may include, for the purposes of collective investment in a common trust fund or funds established and maintained by it, funds held in a fiduciary capacity by any participating bank.

D. A maintaining bank may invest the funds held by it in any fiduciary capacity in one or more common trust funds, provided (i) such investment is not prohibited by the instrument, judgment, decree, or order creating such fiduciary relationship or amendment thereof; (ii) in the case of co-fiduciaries the written consent of the co-fiduciary is obtained by the maintaining bank; and (iii) the maintaining bank has no interest in the assets of the common trust fund other than as a fiduciary.

E. Unless ordered by an appropriate court, the maintaining bank operating a common trust fund shall not be required to render a court accounting with regard to such fund; but, by application to an appropriate court, it may secure approval of such an accounting on such conditions as the court may establish. This section shall not affect the duties of the trustees of the participating trusts under the common trust fund to render accounts of their several trusts.

F. All common trust funds shall be operated in conformity with the regulations issued from time to time by the Commission, which regulations shall conform substantially to the regulations of the Comptroller of the Currency governing the operations of common trust funds.

1983, c. 454, §§ 6.1-30.1, 6.1-30.2, 6.1-30.3; 1984, c. 299; 2010, c. 794.

§ 6.2-1010. Holding stock or other securities as fiduciary.

A. A trust institution holding stock or other securities as fiduciary may hold it in the name of a nominee without mention of the trust in the stock certificate or stock registry book or other book in which such securities are registered. A fiduciary registering stock or other securities in the name of a nominee as herein permitted, shall (i) clearly show upon its trust records the ownership of the stock or other securities by the fiduciary and the facts regarding its holding and (ii) provide that the nominee shall not have possession of the stock certificate or other securities nor access thereto except under the immediate supervision of the fiduciary. The fiduciary shall be personally liable for any loss to the trust resulting from any act of such nominee in connection with stock or other securities so held. Any individual serving as cofiduciary with a trust institution may consent to the trust institution holding such stock or other securities in the name of a nominee as herein provided; however, in such case the trust institution shall forthwith upon demand of the individual cofiduciary cause the stock or other securities to be transferred into the name of the fiduciaries in their fiduciary capacity.

B. Notwithstanding the provision relating to possession of the nominee, the trust institution may permit such certificates or other securities to remain in the possession of the nominee or a clearing corporation as defined in § 8.8A-102, within or without the Commonwealth, if the trust institution obtains adequate protection, through insurance or otherwise, against loss of such certificates or securities due to lack of possession by the fiduciary or possession thereof by the nominee or a clearing corporation.

C. The Commissioner or other appropriate regulatory official may review in advance and approve the protection through insurance or otherwise against loss due to lack of possession of these certificates or securities by the fiduciary.

Code 1950, § 6-103.1; 1958, c. 283; 1966, c. 584, § 6.1-31; 1972, c. 739; 1974, c. 665; 1978, c. 14; 2010, c. 794.

§ 6.2-1011. Voting of bank shares held by trust institution as fiduciary; when disqualified.

A. As used in this section, "banking corporation" includes a bank or a corporation or company that is a bank holding company under 12 U.S.C. § 1841, as amended from time to time.

B. When shares of a national banking association or of a banking corporation organized under the laws of the Commonwealth or another state are held by a trust institution that is serving as a personal representative of a decedent, trustee, guardian of any infant, agent or in any other fiduciary capacity, the trust institution may not (i) vote or participate in the voting of any voting securities of such bank if the securities held in such fiduciary capacity, together with all the other voting securities of such bank held in a fiduciary capacity, exceed 25 percent of the outstanding voting securities of such bank or (ii) vote such voting securities, if the voting securities of such bank held as a personal representative of the decedent, together with all other voting securities of such bank held in a fiduciary capacity, exceed five percent, unless there has been a determination by the Board of Governors of the Federal Reserve System that the right to vote five percent or more of the voting securities but less than 25 percent thereof does not constitute control of that bank.

C. If there is any personal representative, trustee, guardian of any infant, or other fiduciary in addition to the trust institution in such fiduciary capacity, the other fiduciary, if not a director, officer, or employee of the trust institution, may vote such shares. If the trust institution is the sole fiduciary, or if the trust institution is serving along with a director, officer, or employee of the trust institution, it may petition the court, as provided in subsection D, for the appointment of a cofiduciary for the sole purpose of voting such bank shares.

D. When a trust institution has qualified or is serving under the laws of the Commonwealth as personal representative of a decedent, trustee, guardian of any infant, or in any other fiduciary capacity, and in such estate or trust, there are shares of stock of a national banking association or a banking corporation organized under the laws of the Commonwealth or another state, and the trust institution is disqualified under subsection B from voting such shares, the trust institution or any interested party may petition the court in which the institution qualified or is capable to qualify to appoint a cofiduciary for the sole purpose of voting the shares of the banking association or banking corporation held by the estate or trust, which the trust institution is disqualified from voting. The appointment and qualification may be ex parte, and no prior notice to the beneficiary shall be required. The court at the time of such qualification may relieve the cofiduciary of any obligation for the giving of surety on his bond, and if the appointment of the cofiduciary is limited to voting of the bank stock, such order may provide that the cofiduciary shall not be liable or accountable as a fiduciary in the administration of such estate or trust except for the breach of any fiduciary duty in voting or failing to vote such bank stock. No director, officer, or employee of a trust institution shall be eligible to be named cofiduciary under the provisions of this subsection.

1972, c. 203, §§ 6.1-31.1, 6.1-31.2; 1974, c. 665; 2010, c. 794.

§ 6.2-1012. Suspension or prohibition of trust institutions.

The Commission may prohibit or suspend from engaging in trust business any (i) trust company that fails to comply with any of the provisions of § 6.2-1005, 6.2-1006, or 6.2-1008; (ii) bank doing a trust business that fails to comply with any of the provisions of § 6.2-821, 6.2-1005, 6.2-1006, or 6.2-1008; or (iii) trust subsidiary that fails to comply with the provisions of § 6.2-1006 or 6.2-1008.

Code 1950, § 6-103; 1966, c. 584, § 6.1-32; 1974, c. 665; 2010, c. 794.

Article 2 - TRUST COMPANIES

§ 6.2-1013. Definitions.

As used in this article, unless the context requires a different meaning:

"Agent" has the meaning assigned to it in § 13.1-501 of the Virginia Securities Act (§ 13.1-501 et seq.).

"Broker-dealer" has the meaning assigned to it in § 13.1-501 of the Virginia Securities Act.

"Control" means (i) ownership by a person of 25 percent or more of the voting stock of a trust company; (ii) control as defined in the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.); or (iii) as determined by the Commission, the exercise of a controlling influence over the management and policies of a trust company.

"Fiduciary" means executor, administrator, conservator, guardian of a minor, committee, or trustee.

"Investment advisor" has the meaning assigned to it in § 13.1-501 of the Virginia Securities Act.

"Investment advisor representative" has the meaning assigned to it in § 13.1-501 of the Virginia Securities Act.

"Investment company" has the meaning assigned to it in the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.).

"Operating plan" means a plan submitted by an applicant for a certificate of authority, which plan establishes the policies and procedures a trust company will have in effect when the institution opens for business and thereafter (i) to avoid or resolve conflicts of interests, (ii) to prevent improper influences from affecting the actions of the trustee, (iii) to ensure that trust accounts are handled in accordance with recognized standards of fiduciary conduct, and (iv) to assure compliance with applicable laws and regulations.

"Principal" means any person who, directly or indirectly, owns or controls (i) 10 percent or more of the outstanding stock of a stock corporation or (ii) a 10 percent or greater interest in a nonstock corporation or a limited liability company.

1993, c. 432, § 6.1-32.11; 1994, c. 524; 1995, c. 140; 1997, c. 801; 2004, c. 781; 2010, c. 794.

§ 6.2-1014. Certificate required.

No person shall engage in the trust business without first obtaining a certificate of authority from the Commission; however, a bank or savings institution authorized under state or federal laws to engage in the trust business or a trust subsidiary, including a national bank or federal savings bank described in clause (ii) of subsection B of § 6.2-1067, may engage in such business to the extent permitted by law without obtaining a certificate under this article.

1993, c. 432, § 6.1-32.13; 2010, c. 794; 2011, c. 67; 2012, c. 608.

§ 6.2-1015. Application for certificate; fee.

A. An application for a certificate shall (i) be in writing, in such form as the Commission prescribes, (ii) be verified under oath, (iii) be supported by such information, data, and records as the Commission may require, and (iv) include an operating plan.

B. Each application for a certificate of authority shall be accompanied by an investigation fee of $10,000.

1993, c. 432, § 6.1-32.14; 1995, c. 140; 2010, c. 794.

§ 6.2-1016. Bond required.

A. No applicant shall obtain a certificate without filing with the Commission, and maintaining continuously thereafter, a surety bond in such amount as the Commission may from time to time require.

B. In no event shall the amount of the surety bond be less than $1 million.

C. The surety bond required by this section shall be for the benefit of:

1. Any person damaged as a result of a violation of the provisions of, or any regulation adopted pursuant to, this chapter;

2. Any person damaged by the negligence, fraud, or embezzlement of a trust company organized under this article or its directors, officers, or employees; and

3. Any person damaged by any other breach of trust of any trust company organized under this article or its directors, officers, or employees.

D. The Commission may revoke the certificate of any trust company that the Commission finds has failed to maintain a bond as required by this section.

1993, c. 432, § 6.1-32.17; 2010, c. 794.

§ 6.2-1017. Procedure for granting or denying certificate.

Before any trust company shall begin business, it shall obtain from the Commission a certificate of authority authorizing it to do so. Prior to the issuance of such a certificate to a trust company or affiliated trust company, the Commission shall ascertain that:

1. All of the provisions of law have been complied with;

2. The applicant is formed as a trust company for no other reason than to engage in legitimate trust business;

3. Financially responsible persons have subscribed for capital stock, surplus, and a reserve for operation in an amount deemed by the Commission to be sufficient to warrant successful operation, but the capital stock shall not be less than $500,000;

4. Each principal of an applicant has the financial responsibility, character, reputation, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law;

5. Oaths of all the directors have been taken and filed in accordance with § 6.2-1029;

6. The moral fitness, financial responsibility, and business qualifications of those named as officers and directors of the applicant are such as to command the confidence of the community in which the trust company is proposed to be located;

7. If the applicant is an affiliated trust company, the trust company holding company of the applicant is qualified by virtue of its business record, experience, and financial responsibility to control a trust company;

8. In its opinion, the public interest will be served by the formation of a trust company in the community where it is proposed. Authorizing the applicant to engage in the trust business as a trust company shall be deemed in the public interest if, based on all relevant evidence and information, advantages such as, but not limited to, increased competition, additional convenience, or gains in efficiency outweigh possible adverse effects such as, but not limited to, diminished or unfair competition, undue concentration of resources, conflicts of interests, or unsafe or unsound practices;

9. The operating plan and any other relevant evidence and information warrant belief that the applicant will conduct its business in accordance with generally accepted fiduciary standards;

10. The applicant has provided a bond as required by § 6.2-1016;

11. The applicant is not in violation of § 6.2-1021; and

12. Anything else deemed pertinent.

1993, c. 432, § 6.1-32.18; 1994, c. 524; 1995, c. 140; 2010, c. 794.

§ 6.2-1018. Minimum capital; state of incorporation; form of entity.

A certificate shall not be issued under § 6.2-1017 to an applicant:

1. Unless it meets the minimum capital requirement for a trust company prescribed by § 6.2-1017; and

2. That is not a corporation organized under the laws of the Commonwealth.

1993, c. 432, §§ 6.1-32.15, 6.1-32.16; 1994, c. 7; 2010, c. 794.

§ 6.2-1019. Issuance of shares; subscriptions to stock; stock option plans.

A. A trust company shall not issue no-par stock. The stock of a trust company shall be paid for in money at not less than par value, and a trust company shall not begin business until it has received payment in full of the amounts of initial capital specified in its certificate of authority.

B. Money received for subscriptions to or purchases of stock of a trust company before it opens for business shall be deposited in escrow in one or more insured financial institutions or invested in United States government obligations. Such funds shall be under the joint control of at least two organizing directors of the trust company, each of whom shall be bonded for an amount not less than the total amount of money under their control. Such funds, together with any income thereon, less such organizational expenses as have been approved by the trust company's board of directors, shall be remitted to the trust company on the day it opens for business.

C. If the trust company is denied a certificate of authority, or it is otherwise determined that the trust company will not open for business, such funds, after payment of any amount owing for expenses in connection with such attempted organization, including reasonable consulting fees, attorney fees, salaries, filing fees, and other expenses, shall be refunded to subscribers or shareholders. The directors of the trust company, individually, jointly, and severally, shall be liable for any failure of the trust company to refund such funds to the subscribers or shareholders. This liability may be enforced by a suit in equity instituted by one or more of the subscribers or stockholders on behalf of all subscribers or stockholders against the trust company and one or more of its directors.

D. The requirement that capital stock be paid for in money shall not be construed to prohibit the establishment, as otherwise authorized by law, of stock option plans and stock purchase plans, or the issuance of stock pursuant to such plans. Such plans shall be established only after the trust company has opened for business and shall be approved by the shareholders of the company in accordance with applicable provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.).

1994, c. 5, § 6.1-32.18:1; 2010, c. 794.

§ 6.2-1020. Certain transactions by affiliated trust companies prohibited.

An affiliated trust company shall not:

1. During the underwriting period, purchase from an affiliated broker-dealer, for any trust account or for its own account, any security that is being underwritten by that broker-dealer; or

2. Purchase for any trust account or for its own account any security that is issued by a company that owns five percent or more of the capital stock of, or is affiliated with, the affiliated trust company.

1994, c. 524, § 6.1-32.14:2; 1995, c. 140; 2010, c. 794.

§ 6.2-1021. Commissions or fees for sale of stock not permitted.

The Commission shall not issue a certificate of authority to a trust company if any commissions, fees, brokerage, or other compensation by whatever name have been paid or contracted to be paid by the trust company, or by anyone in its behalf, directly or indirectly, to any person for the sale of stock in such trust company. Nothing herein shall be construed to prohibit a trust company that has been issued a certificate of authority and is conducting operations from paying or contracting to pay such commissions or fees in connection with the issue or reissue of shares of stock of the trust company.

1994, c. 5, § 6.1-32.18:2; 2010, c. 794.

§ 6.2-1022. Reacquisition of shares; dividends.

A. A trust company may not purchase, redeem or otherwise reacquire shares of stock it has issued, except that the Commission, upon the petition of a trust company, may permit the company to reacquire its own stock if the Commission finds that the proposed reacquisition will not jeopardize the safety and soundness of the trust company and will not be contrary to the public interest.

B. The board of directors of any trust company may declare a dividend of so much as it finds expedient of the net undivided profits of the trust company, after providing for all expenses, losses, interest, and taxes owed by the trust company. However, before any dividend is declared, capital funds originally paid in shall have been restored by earnings to their initial level, and no dividend shall be declared or paid by the trust company that would impair the paid-in capital of the trust company. Notwithstanding the foregoing provisions of this section, the Commission may limit the payment of dividends by a trust company when it is determined that the limitation is in the public interest and is necessary to ensure the financial soundness of the trust company.

1994, c. 5, § 6.1-32.18:3; 2010, c. 794.

§ 6.2-1023. Acquisition of stock; application.

A. Except as provided in this section, no person shall acquire, directly or indirectly, 10 percent or more of the voting shares of a trust company unless such person first:

1. Files an application with the Commission in such form as the Commission may prescribe;

2. Delivers such other information to the Commission as the Commission may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, and principals and of any proposed new directors, senior officers, and principals of the trust company; and

3. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the acquisition, subject to § 6.2-1024, if it finds that the applicant and (i) its members if applicable, (ii) its directors, senior officers, and principals, and (iii) any proposed new directors, senior officers, and principals, have the financial responsibility, character, reputation, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within 60 days from the date a completed application, accompanied by the required fee, is filed, unless the period is extended by order of the Commission reciting the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

C. The foregoing provisions of this section shall not apply to a person owning 51 percent or more of the capital stock of the trust company at the time of the proposed acquisition; however, such person shall give the Commission 30 days advance written notice of the proposed acquisition and provide such additional information as the Commission may require.

1993, c. 432, § 6.1-32.19; 1995, c. 140; 2004, c. 781; 2010, c. 794.

§ 6.2-1024. Restrictions on control, officers and directors.

A. None of the following individuals or entities shall acquire control of any trust company under § 6.2-1023:

1. An agent;

2. A broker-dealer;

3. An investment advisor;

4. An investment advisor representative;

5. An investment company; or

6. Any corporation, limited liability company, partnership, business trust, association, or similar organization.

B. Nothing in this section shall prohibit (i) the formation of a trust company holding company by a trust company, (ii) any officer, director, or employee of a trust company holding company or a subsidiary of a trust company holding company from owning, indirectly, five percent or more of any class of capital stock of an affiliated trust company, or (iii) the acquisition of a trust company pursuant to § 6.2-1023 by a bank holding company as defined in 12 U.S.C. § 1841 or by a corporation that controls a subsidiary authorized to engage in the trust business under federal law or the laws of any state.

1993, c. 432, § 6.1-32.20; 1994, c. 524; 1995, c. 140; 2004, c. 781; 2010, c. 794.

§ 6.2-1025. Report to Commission of election of director.

Within 60 days following the election or reelection of any person as a director of a trust company, the trust company shall furnish such information to the Commission relative to his personal character, integrity, financial condition, and personal and business background as the Commission shall from time to time prescribe. Such report, under oath, shall be signed by the director as well as a designated officer of the trust company. Any person knowingly making a false statement in such a report is guilty of perjury.

1968, c. 606, § 6.1-48.1; 1974, c. 665, § 6.1-51.1; 1992, c. 552; 1994, c. 105; 2010, c. 794.

§ 6.2-1026. Removal of director or officer; appeals; penalty.

A. Whenever any director or officer of a trust company doing business in the Commonwealth, shall have continued to violate any law relating to such trust company or shall have continued unsafe or unsound practices in conducting the business of such trust company, after the director or officer, and the board of directors of the trust company of which he is a director or officer, have been warned in writing by the Commissioner to discontinue such violation of law or such unsafe or unsound practices, the Commissioner shall certify the facts to the Commission. The Commission shall thereupon enter an order requiring such director or officer to appear before the Commission, within not less than 10 days, to show cause why he should not be removed from office and thereafter restrained from participating in any manner in the management of such trust company. Such order shall contain a brief statement of the facts certified to the Commission by the Commissioner. A copy of such order shall be served upon such director or officer, and a copy thereof shall be sent by registered mail to each director of the trust company affected.

B. If, after granting the accused director or officer a reasonable opportunity to be heard, the Commission shall find that he has continued to violate any law relating to such trust company, or has continued unsafe or unsound practices in conducting the business of such trust company, after he and the board of directors of the trust company of which he is a director or officer have been warned in writing by the Commissioner to discontinue such violation of law or unsafe or unsound practices, the Commission shall enter an order removing such director or officer from office and restraining such director or officer from thereafter participating in any manner in the management of such trust company. A copy of such order shall be served upon such director or officer. A copy of such order shall also be served upon the trust company of which he is a director or officer. Upon such removal the director or officer shall cease to be a director or officer of such trust company and thereafter cease to participate in any manner in the management of such trust company.

C. Any director or officer aggrieved (i) by any order of the Commission entered under subsection B or (ii) by an order refusing to remove another director or officer from office or to restrain him from participating in the management of the trust company, shall have, of right, an appeal to the Supreme Court of Virginia within 60 days from the date of the order.

D. Any director or officer removed or restrained under the provisions of subsection B from participating in any manner in the management of any trust company of which he is a director or officer, and who thereafter participates in any manner in the management of such trust company except as a stockholder therein, is guilty of a Class 6 felony.

Code 1950, §§ 6-40, 6-41, 6-42; 1966, c. 584, §§ 6.1-49, 6.1-50, 6.1-51; 1974, c. 665, § 6.1-51.1; 1979, c. 58; 1992, c. 136; 2010, c. 794.

§ 6.2-1027. Bonds required of officers and employees; blanket bond.

A. The board of directors of every trust company shall require bonds from all of the active officials and employees of such corporation. In lieu of such bonds, the board may obtain one or more blanket bonds. The surety on every bond shall be a bonding or surety company authorized to transact business in Virginia, and the penalty of any such bond shall be increased whenever in the opinion of the Commission it is necessary for the protection of the public interest.

B. If a trust company is unable to obtain the bond required by this section, it shall immediately notify the Commission. The Commission may then direct the trust company to have an audit performed at its expense by an independent certified public accounting firm. The trust company shall obtain blanket bond coverage as soon as such coverage is available. Failure to obtain blanket bond coverage may be cause for action by the Commission as provided by § 6.2-1036.

Code 1950, § 6-46; 1966, c. 584, § 6.1-54; 1974, c. 665; 1979, c. 52; 1992, c. 365; 2010, c. 794.

§ 6.2-1028. Offices.

A. When satisfied that the public interest, as defined in subdivision 8 of § 6.2-1017, will be served, the Commission may authorize:

1. A trust company having paid-up and unimpaired capital and surplus in an amount deemed sufficient to warrant expansion to establish additional offices; and

2. The relocation of any office.

B. The office at which a trust company begins business shall be designated initially as its principal office. The board of directors of a trust company may thereafter redesignate as the principal office another authorized office of the trust company in the Commonwealth. The trust company shall notify the Commission of any such redesignation not later than 30 days before its effective date and shall confirm to the Commission any redesignation within 10 days of its occurrence.

1993, c. 432, § 6.1-32.21; 1997, c. 51; 2010, c. 794.

§ 6.2-1029. Directors.

A. The affairs of every trust company shall be directed by a board of directors. The board shall consist of not less than five nor more than 25 individuals. A majority of the directors shall be citizens of the Commonwealth.

B. Every director of a trust company shall be the sole owner, and have in his personal possession or control shares, of stock of such trust company having a book value of not less than $2,000 and, within 30 days of election, shall take an oath that he will diligently and honestly perform his duties as a director and that he is the sole owner and has in his possession or control the required amount of stock, unencumbered in any way. When a director is reelected or reappointed, he shall take an oath certifying his ownership and control of the required amount of unencumbered stock throughout his previous term.

C. Any director who (i) fails, for a period of 30 days, to take the oath or (ii) does not comply with the requirement for ownership of stock, both as required by subsection B, shall automatically forfeit his office.

D. Within 60 days following the election or reelection of any individual as a director of a trust company, the trust company shall furnish such information to the Commission relative to his personal character, integrity, financial condition, and personal and business background, as the Commission shall from time to time prescribe. Such report, under oath, shall be signed by the director as well as a designated officer of the trust company. Any person knowingly making a false statement in such a report is guilty of perjury.

1993, c. 432, § 6.1-32.22; 1994, c. 105; 2010, c. 794.

§ 6.2-1030. Discount by officer, director, or employee of refused paper.

No officer, director, or employee of a trust company may purchase or discount any note or paper at a rate of interest in excess of what the trust company might charge knowing that the trust company has refused to purchase or discount such paper.

Code 1950, § 6-44; 1966, c. 584, § 6.1-53; 2010, c. 794.

§ 6.2-1031. Reports.

Each trust company and trust company holding company shall file statements of condition and other reports with the Commission in accordance with requirements established by regulation.

1993, c. 432, § 6.1-32.23; 1995, c. 140; 2010, c. 794.

§ 6.2-1032. Investigations; examinations.

A. The Commission may, by its designated officers and employees, as often as it deems necessary, investigate and examine the affairs, business, premises, and records of any trust company and of any trust company holding company. Examinations of such trust companies shall be conducted at least twice in each three-year period.

B. In the course of such investigations and examination, the principals, officers, directors, and employees of such trust company or trust company holding company being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary. For the foregoing purposes, the person making the investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

1993, c. 432, § 6.1-32.24; 1995, c. 140; 2010, c. 794.

§ 6.2-1033. Fees.

A. In order to defray the costs of their examination, supervision, and regulation, every trust company shall pay a fee of $330 per day per examiner during examinations.

B. Each trust company and each trust company holding company shall also pay to the Commission:

1. Such additional or special costs as the Commission may incur in connection with its examination;

2. For investigating an application for authority to establish a branch office pursuant to § 6.2-1028, a fee of $1,800;

3. For investigating an application to change the location of a principal office or branch office, a fee of $1,000; and

4. For investigating an application made pursuant to § 6.2-1023, a fee of $7,000.

1993, c. 432, § 6.1-32.25; 1994, c. 6; 1995, c. 140; 2010, c. 794.

§ 6.2-1034. Regulations.

The Commission may adopt such regulations as it deems appropriate to effect the purposes of this article. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard in accordance with the Commission's Rules. In adopting regulations applicable to affiliated trust companies, the Commission shall be guided, where appropriate, by those standards and requirements concerning self-dealing and conflicts of interests that apply to banks, bank holding companies, and their subsidiaries when engaged in both trust and securities activities.

1993, c. 432, § 6.1-32.26; 1995, c. 140; 2010, c. 794.

§ 6.2-1035. Audits.

The Commission may require trust companies or trust company holding companies to have audits made of their books, records, and methods of operation annually. The Commission may require such audits to be conducted at any other time that it appears to the Commission that (i) the internal controls of a trust company or trust company holding company are not adequate, (ii) it is engaging in unsound practices, or (iii) its financial condition makes such audit necessary.

1993, c. 432, § 6.1-32.27; 1995, c. 140; 2010, c. 794.

§ 6.2-1036. Commission's remedial powers.

A. If the Commission finds that a trust company (i) has failed to fully observe the laws of the Commonwealth, (ii) is being operated in an unsafe or unsound manner, (iii) has failed to comply with any Commission order or regulation, (iv) is engaging in any irregular practices, or (v) is, or is about to become, insolvent or its capital has been, or is in danger of being, impaired, the Commission shall give notice thereof to the officers and directors of the company. If necessary to conserve the assets of the company or protect the public interest, the Commission may:

1. Close the company for a period not exceeding 60 days, which period may be further extended for a like period or periods as the Commission deems necessary;

2. Require that all orders and regulations of the Commission be complied with;

3. Require that the company make reports daily or at such other times as may be required as to the results achieved in carrying out the Commission's orders;

4. Require that any irregularities be promptly corrected;

5. Require that any impairment of capital be made good; or

6. Temporarily suspend the right of the company to receive any further property in a fiduciary capacity.

B. If the Commission determines that a receiver should be appointed for a trust company, the Commission may close the company; take charge of the books, assets and affairs of the company; and apply to any circuit court in the Commonwealth for the appointment of a receiver to take charge of the company's business, assets and affairs. Proceedings for appointment of a receiver for a trust company shall not be entertained by any court except on application of the Commission.

C. The Commissioner may issue and serve upon a trust company a cease and desist order if, in the opinion of the Commissioner, the company is engaging, has engaged, or, there is reasonable cause to believe, is about to engage in an unsafe or unsound practice, irregularity, or any violation of law, rule, or regulation applicable to the conduct of its business, or any Commission order. The cease and desist order shall contain a statement of the facts upon which it is based and may require, in terms that may be mandatory or otherwise, the company and its directors, officers, employees, and agents to cease and desist from the practice or violation. The order shall specify its effective date and shall notify the company of its right to request a hearing in accordance with the Commission's Rules.

D. When the practice or violation specified in an order issued pursuant to subsection C, or any continuation thereof, is likely to prejudice the company's stockholders, or persons having an interest in property held by the company in a fiduciary capacity, the Commissioner may make the order effective immediately. An order shall remain in effect until withdrawn by the Commissioner or terminated by the Commission after a hearing. A request for a hearing shall be given expeditious treatment on the Commission's docket, and the Commission need not allow 10 days' notice to the company.

1993, c. 432, § 6.1-32.28; 1994, c. 524; 1995, c. 140; 2010, c. 794.

§ 6.2-1037. Effect of surrender or revocation of certificate.

If a trust company surrenders its certificate or its certificate is revoked, the trust company, its assets, and the assets it holds in trust shall nevertheless continue to be subject to the provisions of this article, including the provisions of § 6.2-1036.

1993, c. 432, § 6.1-32.29; 2010, c. 794.

§ 6.2-1038. Appointment of receiver.

A. When in the judgment of the Commission it is necessary for the protection of the interests of the Commonwealth or of the creditors of any trust company doing business in the Commonwealth, the Commission shall apply to any court in the Commonwealth having jurisdiction to appoint receivers for the appointment of a receiver to take charge of the business affairs and assets and to wind up the affairs and business of any such trust company failing to comply with the requirements of the Commission, or found upon examination to be insolvent or unable to meet its obligations and the legal demands made upon it in the ordinary course and conduct of its business.

B. Reference is hereby made to §§ 6.2-916 through 6.2-924 and Article 14 (§ 6.2-925 et seq.) of Chapter 8 for provisions applicable to receiverships of trust companies.

Code 1950, § 6-116; 1966, c. 584, § 6.1-102; 2010, c. 794.

§ 6.2-1039. Engaging in trust business without authority; Commission may examine accounts of suspected person; penalty.

A. Every person who trades or deals as a trust company, or conducts a trust business, without authority of law, and their officers and agents, is guilty of a Class 6 felony.

B. The Commission shall have authority to examine the accounts, books, and papers of any person who it has reason to suspect is doing a trust business, in order to ascertain whether such person has violated, or is violating, any provision of this title. The refusal to submit such accounts, books, and papers shall be prima facie evidence of such violation.

Code 1950, § 6-133; 1966, c. 584, § 6.1-111; 1992, c. 136; 1994, c. 7; 2010, c. 794.

§ 6.2-1040. Unlawful use of terms indicating that business is trust company; penalty.

A. A person not authorized to engage in the trust business in the Commonwealth by the provisions of this title or under the laws of the United States, shall not (i) use any office sign having thereon any name or other words indicating that any such office is the office of a trust company; (ii) use or circulate any letterheads, billheads, blank notes, blank receipts, certificates, circulars or any written or printed paper, having thereon any name or word indicating that such person is a trust company; or (iii) use the word "trust" or the equivalent thereof in any foreign language, or the plural thereof in connection with any business other than a trust business.

B. The foregoing prohibitions shall not apply to use by a trust company holding company of the word "trust" or the equivalent thereof in its name, or of a name similar to that of a subsidiary trust company of such trust company holding company.

C. The use of the above-mentioned words in the name of, or in connection with, any other business shall not be prohibited if the context or remaining words show clearly and definitely that the business is not a trust company, and is not carrying on a trust business.

D. Any person violating the provisions of this section, either individually or as an interested party, is guilty of a Class 6 felony.

Code 1950, § 6-134; 1966, c. 584, § 6.1-112; 1972, c. 187; 1992, cc. 24, 136; 2000, c. 56; 2003, c. 592; 2010, c. 794.

§ 6.2-1041. Civil penalties for failure to comply with § 62-1031 or 62-1032.

A. Any trust company failing to comply with any of the provisions of § 6.2-1031, for a period of longer than 30 days, after being called upon by the Commission for a statement, or to do such other act as is therein provided, shall be subject to assessment by the Commission of a civil penalty of not less than $100 nor more than $1,000 per day for each day of noncompliance.

B. Any officer of any trust company who shall refuse to give any examiner the information or refuse to be sworn, as required by § 6.2-1032, shall be subject to assessment by the Commission of a civil penalty of not less than $25 nor more than $100 per day for each day of noncompliance.

Code 1950, § 6-128; 1966, c. 584, § 6.1-114; 1974, c. 665; 1976, c. 658; 1988, c. 555; 1997, c. 142; 2010, c. 794.

§ 6.2-1042. Making derogatory statements affecting trust companies; penalty.

Any person who willfully and maliciously makes, circulates or transmits to another, any statement, rumor or suggestion that is directly or by reference derogatory to the financial condition, or affects the solvency or financial standing of, any trust company doing business in the Commonwealth, or who counsels, aids, procures or induces another to start, transmit, or circulate any such statement or rumor, is guilty of a Class 1 misdemeanor.

Code 1950, § 6-132; 1966, c. 584, § 6.1-119; 1991, c. 710; 2010, c. 794.

§ 6.2-1043. Use of trust company name, logo, or symbol for marketing purposes; penalty.

A. As used in this section, "name, logo, or symbol, or any combination thereof, of a trust company" includes any name, logo, or symbol, or any combination thereof, that is deceptively similar to the name, logo, or symbol of a trust company.

B. Except as provided in subsection C, no person shall use the name, logo, or symbol, or any combination thereof, of a trust company in marketing material provided to or solicitation of another person in a manner such that a reasonable person may believe that the marketing material or solicitation originated from or is endorsed by the trust company or that the trust company is responsible for the marketing material or solicitation.

C. This section shall not apply to (i) an affiliate or agent of the trust company or (ii) a person who uses the name, logo, or symbol of a trust company with the consent of the trust company.

D. Any person violating the provisions of this section, either individually or as an interested party, is guilty of a Class 1 misdemeanor. This section shall not affect the availability of any remedies otherwise available to a trust company.

2005, c. 240, § 6.1-119.1; 2010, c. 794.

§ 6.2-1044. Offenses by officer, director, agent or employee of trust company; penalties.

A. Any officer, director, agent, or employee of any trust company who embezzles, abstracts, or willfully misapplies any of the moneys, funds or credits of, or in the possession or control of the trust company is guilty of larceny and subject to the penalties provided in § 18.2-95 or 18.2-96.

B. Any officer, director, agent or employee of any trust company who (i) issues or puts forth any certificate of deposit, (ii) draws any order or bill of exchange, (iii) makes any acceptance, (iv) assigns any note, bond, draft, bill of exchange, mortgage, judgment, decree or other instrument in writing, or (v) makes any false entry in any book, report or statement of such trust company with intent in any case to injure or defraud the trust company, or any other individual or entity, or to deceive any officer of the trust company or the Commission, or any agent or examiner authorized to examine the affairs of the trust company, and any person, who, with like intent, aids or abets any such officer, director, agent or employee of such trust company in any act described in clauses (i) through (v), is guilty of a Class 5 felony.

C. Any officer of a trust company who knowingly makes a false statement of the condition of any trust company is guilty of a Class 5 felony.

Code 1950, §§ 6-128, 6-138; 1966, c. 584, § 6.1-122; 1974, c. 665; 2010, c. 794.

§ 6.2-1045. Officers, directors, agents and employees violating or causing trust company to violate laws; civil liability not affected.

Any officer, director, agent, or employee of any trust company who knowingly violates or who knowingly causes any trust company to violate any provision of this chapter, or knowingly participates or knowingly acquiesces in any such violation, unless other punishment is provided for the offense of such officer, agent, or employee, is guilty of a Class 1 misdemeanor. The provisions of this section shall not affect the civil liability of any such officer, director, agent or employee.

Code 1950, § 6-139; 1966, c. 584, § 6.1-123; 1974, c. 665; 2010, c. 794.

§ 6.2-1046. Civil penalties for violation of Commission's orders.

A. The Commission may impose, enter judgment for, and enforce by its process, a civil penalty not exceeding $10,000 upon any trust company or against any of its directors, officers, or employees, who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any lawful order of the Commission.

B. The Commission may remove from office any director or officer of a trust company for a second or subsequent violation by him of any such order.

C. In all cases the defendant shall have an opportunity to be heard and to introduce evidence, and the right to appeal as provided by law.

1968, c. 791, § 6.1-125; 1974, c. 665; 1976, c. 658; 2010, c. 794.

Article 3 - Trust Subsidiaries

§ 6.2-1047. Definitions.

As used in this article, unless the context requires a different meaning:

"Affiliate bank" with respect to a trust subsidiary means (i) a bank of which more than 50 percent of the shares are owned directly or indirectly through a subsidiary by the same Virginia bank holding company that owns directly or indirectly through a subsidiary all the shares, except directors' qualifying shares, of a trust subsidiary or a subsidiary bank or (ii) a bank that owns some or all of the shares of a trust subsidiary or a subsidiary bank.

"Bank" has the meaning assigned to it in § 6.2-800.

"Bank holding company" has the meaning assigned to it in § 6.2-800.

"Bank under common ownership" means a bank of which 80 percent or more of its common stock is owned, directly or indirectly through a subsidiary, by the same Virginia bank holding company as owns, directly or indirectly through a subsidiary, at least 80 percent of the stock of the subsidiary bank substituted as fiduciary.

"Fiduciary capacity" means every capacity in which a trust institution is granted the right to act pursuant to § 6.2-1002 and every other capacity in which a bank acts, or may act, through its trust department, including, without limitation, trusteeship with respect to common trust funds.

"Main office" is the place designated in the articles of incorporation or articles of association as the main office of the bank or trust subsidiary at which the principal functions of the bank or trust subsidiary are to be conducted.

"Owning bank" means a bank owning 10 percent or more of the shares of a trust subsidiary.

"Subsidiary bank" means a bank authorized to exercise trust powers, at least 80 percent of the outstanding shares of which are owned directly or indirectly through a subsidiary by a Virginia bank holding company.

"Trust office" means, with regard to a trust subsidiary or a bank having trust powers, an office for trust purposes only, at which the trust subsidiary or bank holds itself out as dealing with the public in the solicitation and conduct of its trust business.

"Trust subsidiary under common ownership" means a trust subsidiary at least 80 percent or more of which is owned, directly or indirectly through a subsidiary, by the same Virginia bank holding company as owns, directly or indirectly through a subsidiary, at least 80 percent of the stock of the subsidiary bank substituted as fiduciary.

"Virginia bank holding company" means a bank holding company that, directly or indirectly through a subsidiary, owns or controls a bank the main office of which is located in the Commonwealth.

1974, c. 286, § 6.1-32.2; 1991, c. 282; 2010, c. 794; 2020, c. 239.

§ 6.2-1048. Organization of subsidiary trust companies.

A. A subsidiary trust company may be incorporated and organized under Article 3 (§ 13.1-618 et seq.) of Chapter 9 of Title 13.1 or under federal laws relating to national banking associations for the purpose of conducting a trust business and other activities and business incidental thereto in which a trust subsidiary is permitted to engage as provided in § 6.2-1049.

B. All the outstanding voting shares of a subsidiary trust company, other than directors' qualifying shares, shall be owned directly or indirectly through a subsidiary by (i) one or more Virginia bank holding companies, (ii) one or more banks authorized to have a main or parent office in Virginia, or (iii) both.

C. A trust subsidiary shall be subject to regular examination and supervision by the Commission or by the Comptroller of the Currency of the United States.

D. If incorporated under Title 13.1, a trust subsidiary shall pay such examination fees as may be from time to time imposed upon trust departments of banks that are subject to examination by the Commission.

1974, c. 286, § 6.1-32.3; 1991, c. 282; 2004, c. 781; 2010, c. 794.

§ 6.2-1049. Permissible business.

A trust subsidiary shall be permitted to engage in trust business and activities that may be engaged in by a bank pursuant to § 6.2-1002, and business incidental thereto. A trust subsidiary shall not accept deposits or conduct any other business except as may be incidental to the trust business being conducted by it.

1974, c. 286, § 6.1-32.5; 1997, c. 801; 2010, c. 794.

§ 6.2-1050. Directors.

The affairs of every trust subsidiary incorporated under the laws of the Commonwealth shall be managed by a board of directors. The board shall consist of not fewer than five individuals. A majority of the directors shall be citizens of the Commonwealth. Directors need not be stockholders of the trust subsidiary unless the articles of incorporation so require.

1974, c. 286, § 6.1-32.4; 2010, c. 794.

§ 6.2-1051. Report to Commission of election of director.

Within 60 days following the election or reelection of any person as a director of a trust subsidiary, the trust subsidiary shall furnish such information to the Commission relative to his personal character, integrity, financial condition, and personal and business background as the Commission shall from time to time prescribe. Such report, under oath, shall be signed by the director as well as a designated officer of the trust subsidiary. Any person knowingly making a false statement in such a report is guilty of perjury.

1968, c. 606, § 6.1-48.1; 1974, c. 665, § 6.1-51.1; 1992, c. 552; 1994, c. 105; 2010, c. 794.

§ 6.2-1052. Removal of director or officer; appeals; penalty.

A. Whenever any director or officer of a trust subsidiary doing business in the Commonwealth, shall have continued to violate any law relating to such trust subsidiary or shall have continued unsafe or unsound practices in conducting the business of such trust subsidiary, after the director or officer, and the board of directors of the trust subsidiary of which he is a director or officer, have been warned in writing by the Commissioner to discontinue such violation of law or such unsafe or unsound practices, the Commissioner shall certify the facts to the Commission. The Commission shall thereupon enter an order requiring such director or officer to appear before the Commission, within not less than 10 days, to show cause why he should not be removed from office and thereafter restrained from participating in any manner in the management of such trust subsidiary. Such order shall contain a brief statement of the facts certified to the Commission by the Commissioner. A copy of such order shall be served upon such director or officer, and a copy thereof shall be sent by registered mail to each director of the trust subsidiary affected.

B. If, after granting the accused director or officer a reasonable opportunity to be heard, the Commission shall find that he has continued to violate any law relating to such trust subsidiary, or has continued unsafe or unsound practices in conducting the business of such trust subsidiary, after he and the board of directors of the trust subsidiary of which he is a director or officer have been warned in writing by the Commissioner to discontinue such violation of law or unsafe or unsound practices, the Commission shall enter an order removing such director or officer from office and restraining such director or officer from thereafter participating in any manner in the management of such trust subsidiary. A copy of such order shall be served upon such director or officer. A copy of such order shall also be served upon the trust subsidiary of which he is a director or officer. Upon such removal the director or officer shall cease to be a director or officer of such trust subsidiary and thereafter cease to participate in any manner in the management of such trust subsidiary.

C. Any director or officer aggrieved by (i) any order of the Commission entered under subsection B or (ii) an order refusing to remove another director or officer from office or to restrain him from participating in the management of the trust subsidiary, shall have, of right, an appeal to the Supreme Court of Virginia within 60 days from the date of the order.

D. Any director or officer removed or restrained under the provisions of subsection B from participating in any manner in the management of any trust subsidiary of which he is a director or officer, and who thereafter participates in any manner in the management of such trust subsidiary except as a stockholder therein, is guilty of a Class 6 felony.

Code 1950, §§ 6-40, 6-41, 6-42; 1966, c. 584, §§ 6.1-49, 6.1-50, 6.1-51; 1974, c. 665, § 6.1-51.1; 1979, c. 58; 1992, c. 136; 2010, c. 794.

§ 6.2-1053. Bonds required of officers and employees; blanket bond.

A. The board of directors of every trust subsidiary shall require bonds from all of the active officials and employees of such corporation. In lieu of such bonds, the board may obtain one or more blanket bonds. The surety on every bond shall be a bonding or surety company authorized to transact business in Virginia, and the penalty of any such bond shall be increased whenever in the opinion of the Commission it is necessary for the protection of the public interest.

B. If a trust subsidiary is unable to obtain the bond required by this section, it shall immediately notify the Commission, which may then direct the trust subsidiary to have an audit performed at its expense by an independent certified public accounting firm. The trust subsidiary shall obtain blanket bond coverage as soon as such coverage is available. Failure to obtain blanket bond coverage may be cause for action by the Commission as provided by § 6.2-906.

Code 1950, § 6-46; 1966, c. 584, § 6.1-54; 1974, c. 665; 1979, c. 52; 1992, c. 365; 2010, c. 794.

§ 6.2-1054. Certificate required.

No trust subsidiary, other than a wholly owned subsidiary of a national banking association, shall engage in trust business without first obtaining a certificate of authority from the Commission, or the Comptroller of the Currency if it is organized as a national banking association. The Commission shall not grant such certificate unless:

1. The capital and surplus of the trust subsidiary equal or exceed $200,000; and

2. The Commission is satisfied that (i) the trust subsidiary is capable of complying with the provisions of this chapter and (ii) the officers and directors have the moral fitness and business qualifications necessary to manage the trust subsidiary.

1974, c. 286, § 6.1-32.5; 1997, c. 801; 2010, c. 794.

§ 6.2-1055. Trust offices.

A trust subsidiary may have trust offices at locations where branches are permitted under § 6.2-831, upon approval of the Commission.

1974, c. 286, § 6.1-32.6; 1987, c. 352; 2010, c. 794.

§ 6.2-1056. When security not required of trust subsidiaries.

No trust subsidiary with combined unimpaired capital stock and surplus of $200,000 or more shall be required by any officer or court of the Commonwealth to give security upon appointment to or acceptance of any office or trust that it may, by law, be authorized to execute. No trust subsidiary shall qualify in a fiduciary capacity on an estate that has a value in excess of its combined unimpaired capital and surplus, without giving security for such excess, unless:

1. The requirement that the trust subsidiary give security for such excess is waived by the person creating such fiduciary relationship;

2. A Virginia bank holding company or a bank owning, directly or indirectly through a subsidiary bank, 100 percent of the stock, exclusive of directors' qualifying shares, of the trust subsidiary files with the Commission and with the circuit court for the jurisdiction in which the main office of the bank holding company or bank is located an undertaking to be fully responsible for the existing and future fiduciary acts and omissions of its trust subsidiary. If such undertaking is filed, a trust subsidiary may qualify in a fiduciary capacity without giving security if the assets it is to receive in such capacity have a value not greater than the combined and unimpaired capital and surplus of the parent Virginia bank holding company or parent bank that has undertaken to be responsible for the acts of such trust subsidiary. If no such undertaking shall have been filed, and corporate surety is provided, the premium thereof shall be borne by the trust subsidiary and not the fiduciary estate; or

3. If an affiliate bank shall already have qualified in any fiduciary capacity and given bond, without security, and the trust subsidiary or subsidiary bank shall qualify as successor fiduciary, then, if the order of substitution so provides, and the fiduciary for which there is to be substitution consents, the predecessor fiduciary shall remain liable on its bond for the acts of its named successor and no security shall be required of the successor fiduciary, if the bond of the fiduciary for which there is to be substitution is otherwise sufficient.

1974, c. 286, § 6.1-32.7; 2010, c. 794.

§ 6.2-1057. Deposits held or received by trust subsidiaries or subsidiary bank with affiliate banks.

A. Funds received or held by a trust subsidiary or subsidiary bank while awaiting investment or distribution shall not be used by an affiliate bank or owning bank in the conduct of its business or deposited in such bank, unless the bank first delivers to its trust department or to the trust subsidiary or subsidiary bank, as collateral security therefor, securities of any of the classes described in subdivision B 1, B 2, or B 3 of § 6.2-1005, in an amount described in subsection B.

B. The securities deposited as collateral as required by subsection A shall be owned by the bank and shall at all times be at least equal in market value to the amount of trust funds held on deposit by such trust subsidiary or subsidiary bank, less such amount thereof as are insured by the Federal Deposit Insurance Corporation.

C. In the event of the failure or liquidation of such bank, the trust subsidiary or subsidiary bank and the owners of the beneficial interest in such trust funds shall have a lien on the bonds or other securities so set apart, in addition to their claims against the estate of the bank.

1974, c. 286, § 6.1-32.8; 1991, c. 282; 2010, c. 794.

§ 6.2-1058. Substitution of trust subsidiary as fiduciary.

A. Upon obtaining a certificate to engage in the trust business, a trust subsidiary may file an application in the circuit court of the jurisdiction in which its main office is located requesting that it be substituted, except as may be excluded in such application, in every fiduciary capacity for each of its owning banks, or, in the case of a Virginia bank holding company, for any one or more of its affiliate banks specified in the application.

B. Upon finding that (i) the trust subsidiary has obtained a certificate to engage in the trust business by the Commission, or by the Comptroller of the Currency if the trust subsidiary is a national banking association, the main office of which is in the Commonwealth and (ii) the requirements of § 6.2-1056 have been met, the court shall enter an order substituting the trust subsidiary in every fiduciary capacity for each of its specified affiliate banks, or specified owning banks, except as may be otherwise specified in the application.

C. Upon entry of such order, the trust subsidiary shall, without further act, be substituted in every fiduciary capacity. The substitution shall be evidenced by filing a copy of the order with the clerk of any circuit court in the Commonwealth. The order shall be indexed in each index in the records of such court in which substitutions of fiduciaries are otherwise indexed. The application may be made ex parte and need not list the fiduciary capacities in which substitution is made. If the requirements of § 6.2-1056 have been met, the order of substitution shall specify that the trust subsidiary shall be deemed without further act to have given bond with open penalty with respect to each fiduciary capacity in which there is substitution.

D. Any bond, with corporate surety, posted under this section or § 6.2-1056 may be a blanket bond conditioned as otherwise contemplated by law.

E. Each designation in a will or other instrument heretofore or hereafter executed of a bank as fiduciary shall be deemed a designation of the trust subsidiary substituted for such bank pursuant to this section except when the instrument is executed after such substitution and expressly negates the application of this section. No waiver of surety with respect to any fiduciary bond shall be effective except in such case when the bond would be otherwise sufficient as contemplated by § 6.2-1056 or 6.2-1059. Any grant in such an instrument of any discretionary power shall be deemed conferred upon the fiduciary deemed to have been nominated hereunder.

F. A bank shall account jointly with the trust subsidiary that has been substituted as fiduciary for such bank pursuant to this section for the accounting period during which the trust subsidiary is initially so substituted. Upon substitution pursuant to this section, the bank shall deliver to the trust subsidiary all assets held by the bank as fiduciary, except assets held for accounts to which there has been no substitution. Upon such substitution, all such assets shall become the property of the trust subsidiary as fiduciary without the necessity of any instrument of transfer or conveyance.

1974, c. 286, § 6.1-32.9; 1987, c. 352; 1991, c. 282; 2010, c. 794.

§ 6.2-1059. Substitution of subsidiary bank as fiduciary.

A. Upon obtaining permission to engage in the trust business, a subsidiary bank may file an application in the circuit court of the jurisdiction in which its main office is located requesting that it be substituted, except as may be specified in such application, in every fiduciary capacity for a bank under common ownership or a trust subsidiary under common ownership.

B. Upon a finding that (i) the subsidiary bank has been granted such permission to engage in the trust business by the Commission or the Comptroller of the Currency and (ii) the unimpaired capital and surplus of such subsidiary bank is sufficient as prescribed in § 6.2-1003, or bond with corporate surety has been posted for any excess, or has been validly waived, the court shall enter an order substituting the subsidiary bank in every fiduciary capacity for each of the specified banks or trust subsidiaries under common ownership, except as may be otherwise specified in the application.

C. Upon entry of such order, such subsidiary bank shall, without further act, be substituted in every such fiduciary capacity. The substitution shall be evidenced by filing a copy of the order with the clerk of any circuit court in the Commonwealth. The order shall be indexed in each index in the records of such court in which substitutions of fiduciaries are otherwise indexed. The application may be made ex parte and need not list the fiduciary capacities in which substitution is made. If a bank or trust subsidiary under common ownership with the subsidiary bank shall already have qualified in any fiduciary capacity and given bond, without surety, then if the order of substitution shall so provide, which it may provide only if the fiduciary for which there is to be substitution consents, the predecessor fiduciary shall remain liable on its bond for the acts of its named successor, and no security or corporate surety shall be required of the successor fiduciary on its bond.

D. Any bond, with corporate surety, posted under this section or under § 6.2-1056 may be a blanket bond conditioned as otherwise contemplated by law.

E. Each designation in a will or other instrument heretofore or hereafter executed of a bank or trust subsidiary as fiduciary shall be deemed a designation of the subsidiary bank substituted for such bank or trust subsidiary pursuant to this section except when the instrument is executed after such substitution and expressly negates the application of this section. No waiver of surety with respect to any fiduciary bond shall be effective except in such case when the bond would be otherwise sufficient as contemplated by § 6.2-1056 or this section. Any grant in such an instrument of any discretionary power shall be deemed conferred upon the fiduciary deemed to have been nominated hereunder.

F. A bank or trust subsidiary shall account jointly with the subsidiary bank that has been substituted as fiduciary for such bank or trust subsidiary pursuant to this section for the accounting period during which the subsidiary bank is initially so substituted. Upon substitution pursuant to this section, the bank or trust subsidiary shall deliver to the substituted subsidiary bank all assets held by the bank or trust subsidiary as fiduciary, except assets held for accounts to which there has been no substitution. Upon such substitution, all such assets shall become the property of the subsidiary bank as fiduciary without the necessity of any instrument of transfer or conveyance.

1974, c. 286, § 6.1-32.9; 1987, c. 352; 1991, c. 282; 2010, c. 794; 2020, c. 239.

§ 6.2-1060. Trust subsidiaries to have same powers and restrictions as bank trust departments.

Wherever there is granted to or imposed upon a bank having and exercising trust powers any further powers in the nature of trust powers or any restriction upon any such powers, whether under this title or otherwise, it is intended that such grant to or restriction upon a bank in its trust powers shall be equally applicable to a trust subsidiary, unless context shall otherwise require or unless this chapter or Chapter 8 (§ 6.2-800 et seq.) specifically covers such situation or provides otherwise.

1974, c. 286, § 6.1-32.10; 2010, c. 794.

§ 6.2-1061. Reports; investigations and examinations; civil penalties.

A. Each trust subsidiary shall file statements of condition and other reports with the Commission in accordance with the requirements established by regulation.

B. The Commission may, by its designated officers and employees, as often as it deems necessary, investigate and examine the affairs, business, premises, and records of any trust subsidiary. Examinations of such trust subsidiaries shall be conducted at least twice in each three-year period.

C. In the course of such investigations and examination, the principals, officers, directors, and employees of such trust subsidiary being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary. For the foregoing purposes, the person making the investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

D. Any trust subsidiary that fails to comply with the provisions of subsection A, for a period of longer than 30 days, after being called upon by the Commission for a statement, or to do such other act as is therein provided, shall be subject to assessment by the Commission of a civil penalty of not less than $100 nor more than $1,000 per day for each day of noncompliance.

E. Any officer of any trust subsidiary being investigated or examined by the Commission who shall refuse to give any examiner the information or refuse to be sworn, as required by subsections B and C, shall be subject to assessment by the Commission of a civil penalty of not less than $25 nor more than $100 per day for each day of noncompliance.

Code 1950, § 6-128; 1966, c. 584, § 6.1-114; 1974, c. 665; 1976, c. 658; 1988, c. 555; 1997, c. 142; 2010, c. 794.

§ 6.2-1062. Offenses by officer, director, agent or employee of trust subsidiary; penalties.

A. Any officer, director, agent, or employee of any trust subsidiary who embezzles, abstracts, or willfully misapplies any of the moneys, funds or credits of, or in the possession or control of the trust subsidiary is guilty of larceny and subject to the penalties provided in § 18.2-95 or 18.2-96.

B. Any officer, director, agent or employee of any trust subsidiary who (i) issues or puts forth any certificate of deposit, (ii) draws any order or bill of exchange, (iii) makes any acceptance, (iv) assigns any note, bond, draft, bill of exchange, mortgage, judgment, decree or other instrument in writing, or (v) makes any false entry in any book, report or statement of such trust subsidiary with intent in any case to injure or defraud the trust subsidiary, or any other individual or entity, or to deceive any officer of the trust subsidiary or the Commission, or any agent or examiner authorized to examine the affairs of the trust subsidiary, and any person, who, with like intent, aids or abets any such officer, director, agent or employee of such trust subsidiary in any act described in clauses (i) through (v), is guilty of a Class 5 felony.

C. Any officer of a trust subsidiary who knowingly makes a false statement of the condition of any trust subsidiary is guilty of a Class 5 felony.

Code 1950, §§ 6-128, 6-138; 1966, c. 584, § 6.1-122; 1974, c. 665; 2010, c. 794.

§ 6.2-1063. Officers, directors, agents and employees violating or causing trust subsidiary to violate laws; civil liability not affected.

Any officer, director, agent, or employee of any trust subsidiary who knowingly violates or who knowingly causes any trust subsidiary to violate any provision of this chapter, or knowingly participates or knowingly acquiesces in any such violation, unless other punishment is provided for the offense of such officer, agent, or employee, is guilty of a Class 1 misdemeanor. The provisions of this section shall not affect the civil liability of any such officer, director, agent or employee.

Code 1950, § 6-139; 1966, c. 584, § 6.1-123; 1974, c. 665; 2010, c. 794.

§ 6.2-1064. Civil penalties for violation of Commission's orders.

A. The Commission may impose, enter judgment for, and enforce by its process, a civil penalty not exceeding $10,000 upon any trust subsidiary or against any of its directors, officers, or employees, who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any lawful order of the Commission.

B. The Commission may remove from office any director or officer of a trust subsidiary for a second or subsequent violation by him of any such order.

C. In all cases the defendant shall have an opportunity to be heard and to introduce evidence, and the right to appeal as provided by law.

1968, c. 791, § 6.1-125; 1974, c. 665; 1976, c. 658; 2010, c. 794.

Article 4 - MULTISTATE TRUST INSTITUTIONS

§ 6.2-1065. Definitions.

As used in this article, unless the context requires a different meaning:

"Acquisition of a trust office" means the acquisition of a trust office located in a host state, without acquiring the trust institution of such office.

"Bank" has the meaning assigned to it in 12 U.S.C. § 1813 (a)(1) of the Federal Deposit Insurance Company Act of 1956 (12 U.S.C. § 1811 et seq.), as amended.

"Bank supervisory agency" means: (i) any agency of another state with primary responsibility for chartering and supervising a trust institution and (ii) the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Board of Governors of the Federal Reserve System and any successor to these agencies.

"Home state" means (i) with respect to a federally chartered trust institution, the state where such institution maintains its principal office and (ii) with respect to any other trust institution, the state that chartered such institution.

"Home state regulator" means the bank supervisory agency with primary responsibility for chartering and supervising an out-of-state trust institution.

"Host state" means a state, other than the home state of a trust institution, in which the trust institution maintains or seeks to acquire or establish an office.

"New trust office" means a trust office located in a host state that (i) is originally established by the trust institution as a trust office and (ii) does not become a trust office of the trust institution as a result of (a) the acquisition of another trust institution or trust office of another trust institution or (b) a merger, consolidation, or conversion involving any such trust institution or trust office.

"Office" with respect to a trust institution means the principal office or a trust office, but not a branch.

"Out-of-state bank" means a bank chartered to act as a fiduciary whose home state is a state other than the Commonwealth.

"Out-of-state trust company" means a trust company or trust subsidiary whose home state is a state other than the Commonwealth.

"Out-of-state trust institution" means a trust institution whose home state is a state other than the Commonwealth.

"Principal office" with respect to (i) a state trust company, means a location designated by such trust company as its main office pursuant to § 6.2-1028 or 6.2-1047 or (ii) a trust institution other than a state trust company, means its principal place of business in the United States.

"State bank" or "Virginia state bank" means a bank chartered under the laws of the Commonwealth and permitted to engage in the trust business pursuant to § 6.2-819.

"State trust company" means a corporation organized or reorganized as a trust company under Article 2 (§ 6.2-1013 et seq.) or Article 3 (§ 6.2-1047 et seq.) of this chapter.

"State trust institution" means a trust institution having its principal office in the Commonwealth.

"Trust company" means a state trust company or any other entity chartered to act as a fiduciary that is not a bank.

"Trust institution" means a bank or trust company chartered by a state bank supervisory agency or by the Office of the Comptroller of Currency.

"Trust office" means an office at which a trust institution engages in a trust business and not in the banking business.

1999, c. 835, § 6.1-32.32; 2010, c. 794.

§ 6.2-1066. Interstate trust offices by Virginia state banks.

A. With the prior approval of the Commission, any Virginia state bank or state trust company may establish a new trust office or acquire a trust office in a state other than the Commonwealth.

B. A Virginia state bank or state trust company desiring to establish and maintain a trust office in another state under this section shall file an application or notice on a form prescribed by the Commission and pay the branch application fee set forth in subdivision B 3 of § 6.2-908. If the Commission finds that the applicant has the financial resources sufficient to undertake the proposed expansion without adversely affecting its soundness and that the laws of the host state permit the establishment of the trust office, it may approve the application. In acting on the application, the Commission shall consider the views of the state bank supervisor of the host state where the trust office is proposed to be located.

1999, c. 835, § 6.1-32.33; 2010, c. 794.

§ 6.2-1067. Trust business of out-of-state trust institution.

A. An out-of-state trust institution that establishes or maintains one or more offices in the Commonwealth under this article may conduct any activity at each such office that would be authorized under the laws of the Commonwealth for a state trust institution to conduct at such an office.

B. An out-of-state trust institution may engage in a trust business in the Commonwealth if it (i) maintains (a) a trust office in the Commonwealth as permitted by this article or (b) a branch in the Commonwealth, or (ii) is a national bank or federal savings bank, with or without an office or a branch in the Commonwealth, that is supervised and regulated by the federal Comptroller of the Currency and is authorized to serve as trustee, as executor, as administrator, or in another fiduciary capacity pursuant to § 92a of the National Bank Act (12 U.S.C. § 21 et seq.) or § 5(n) of the Home Owners' Loan Act (12 U.S.C. § 1461 et seq.).

1999, c. 835, §§ 6.1-32.34, 6.1-32.35; 2010, c. 794; 2012, c. 608.

§ 6.2-1068. Establishing or acquiring an interstate trust office; additional trust offices; notice of closure.

A. An out-of-state trust institution that does not already maintain a trust office in the Commonwealth and that meets the requirements of this article may:

1. Establish and maintain a new trust office in the Commonwealth; or

2. Acquire and maintain a trust office in the Commonwealth.

B. An out-of-state trust institution that maintains a trust office in the Commonwealth under this article may establish or acquire additional trust offices in the Commonwealth to the same extent that a state trust institution may establish or acquire additional offices in the Commonwealth, provided it follows the procedures for establishing or acquiring such offices set forth in this article.

C. An out-of-state trust institution that maintains an office in the Commonwealth under this article shall give at least 30 days' prior written notice, or in the case of an emergency transaction, such shorter notice as is consistent with applicable state or federal law, to the Commission of any merger, consolidation, or other transaction involving the trust institution that would cause any trust office operated by the institution in this state to be maintained by another trust institution or cause the operation of such an office to cease.

1999, c. 835, §§ 6.1-32.36, 6.1-32.37, 6.1-32.42, 6.1-32.44; 2010, c. 794.

§ 6.2-1069. Filing requirements.

An out-of-state trust institution desiring to establish and maintain a new trust office or acquire and maintain a trust office in the Commonwealth pursuant to this article shall submit to the Commission a copy of the application or notice it files with its home state regulator or the responsible federal bank supervisory agency to establish or acquire such office. Such submission shall be made at the same time the application or notice is filed by the out-of-state trust institution with such home state regulator or responsible federal bank supervisory agency. The out-of-state trust institution shall also comply with the requirements of Article 17 (§ 13.1-757 et seq.) of the Virginia Stock Corporation Act and pay any filing fee required by the Commission.

1999, c. 835, § 6.1-32.38; 2010, c. 794.

§ 6.2-1070. Conditions for approval.

A trust office of an out-of-state trust institution shall not be acquired or established under this article unless:

1. In the case of a new trust office, the laws of the home state of the out-of-state trust institution permit state trust institutions to establish and maintain new trust offices in that state under substantially the same terms as set forth in this article.

2. In the case of a trust office to be established through the acquisition of a trust office, the laws of the home state of the out-of-state trust institution permit state trust institutions to establish and maintain trust offices in that state through the acquisition of trust offices under substantially the same terms as set forth in this article.

1999, c. 835, § 6.1-32.39; 2010, c. 794.

§ 6.2-1071. Examinations; periodic reports; cooperative agreements; assessment of fees.

A. The Commission may make such examinations of any office established and maintained in the Commonwealth pursuant to this article by an out-of-state trust institution as the Commission may deem necessary to determine whether the office is operating in compliance with the laws of the Commonwealth and to ensure the office is being operated in a safe and sound manner. The provisions of § 6.2-901 that apply to examinations of banks shall apply to examinations of an office conducted under this section. The Commission shall also have authority to examine the principal office of an out-of-state trust institution, as necessary. When any such examination is conducted outside the Commonwealth, the out-of-state trust institution shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement, the actual travel and reasonable living expenses incurred on account of such examination, or shall pay for such examination at a reasonable per diem rate approved by the Commission.

B. The Commission may require periodic reports from any out-of-state trust institution that maintains an office in the Commonwealth to the extent such reporting requirements (i) apply equally to similarly situated trust institutions having Virginia as their home state and (ii) are not preempted by federal laws. Such reports shall be filed under oath with such frequency and in such scope and detail as may be appropriate for the purpose of assuring continuing compliance with the provisions of this article.

C. The Commission may enter into cooperative agreements with the appropriate state bank supervisors and federal bank regulatory agencies for the examination of any trust office in the Commonwealth of an out-of-state trust institution or any office of a state trust institution in any host state, and may accept such agency's report of examination and report of investigation in lieu of conducting its own examinations or investigations. The Commission may enter into joint actions with other state bank supervisors and federal banking agencies having concurrent jurisdiction over any office maintained in this state by an out-of-state trust institution or any office established and maintained by a state trust institution in any host state; however, the Commission may take such actions independently to carry out its responsibilities under this article and to assure compliance with the laws of the Commonwealth.

D. Out-of-state trust institutions may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of the Commonwealth and regulations of the Commission. Such fees may be shared with other state and federal bank supervisory agencies in accordance with agreements between them and the Commission.

1999, c. 835, § 6.1-32.40; 2010, c. 794.

§ 6.2-1072. Enforcement.

If the Commission determines that there is any violation of any applicable law or regulation in the operation of an out-of-state trust institution engaged in business in this state or that a trust office of such an institution in this state is being operated in an unsafe and unsound manner, the Commission shall have authority to undertake such enforcement actions as it would be permitted to take if the office were a Virginia state bank or state trust company.

1999, c. 835, § 6.1-32.41; 2010, c. 794.

§ 6.2-1073. Regulations; fees.

The Commission may adopt such regulations, and may provide for the payment of such reasonable application and administration fees, as it finds necessary and appropriate in order to implement the provisions of this article.

1999, c. 835, § 6.1-32.43; 2010, c. 794.

Article 5 - PRIVATE TRUST COMPANIES

§ 6.2-1074. Definitions.

As used in this article, unless the context requires a different meaning:

"Degrees of kinship" means, with respect to two persons, (i) degrees of lineal kinship computed by counting one degree for each person in the line of ascent or descent, exclusive of the person from whom the computing begins and (ii) degrees of collateral kinship computed by commencing with one of the persons and ascending from that person to a common ancestor, descending from that ancestor to the other person, and counting one degree for each person in the line of ascent and in the line of descent, exclusive of the person from whom the computation begins, the total to represent the degree of such kinship.

"Designated relative" means the individual to or through whom the family members are related.

"Family" means a designated relative and family members of that designated relative.

"Family member" means the designated relative and:

1. Any individual within (i) the fifth degree of lineal kinship to the designated relative or (ii) the ninth degree of collateral kinship to the designated relative, for which purposes only a legally adopted individual shall be treated as a natural child of the adoptive parents;

2. The present or past spouse of the designated relative and of any individual qualifying as a family member under subdivision 1;

3. A trust established (i) by a family member or (ii) exclusively for the benefit of one or more family members;

4. A stock corporation, limited partnership or limited liability company, all of the capital stock, partnership interests, membership interests, or other equity interests of which are owned by one or more family members, their spouses qualifying under subdivision 2, their trusts qualifying under subdivision 3, or their estates qualifying under subdivision 5;

5. The estate of a family member; or

6. A charitable foundation or other charitable entity created by a family member.

"Fiduciary" means executor, administrator, conservator, guardian, committee, or trustee.

"Operating plan" means a plan that establishes the policies and procedures a private trust company will have in effect when the institution opens for business and thereafter (i) to ensure that trust accounts are handled in accordance with recognized standards of fiduciary conduct and (ii) to assure compliance with applicable laws and regulations.

"Private trust business" means acting as or performing the duties of a fiduciary in the regular course of its business for family members.

"Private trust company" means a corporation or limited liability company that is organized to engage in private trust business under this article with one or more family members and that does not transact business with the general public.

"Tax" includes, but is not limited to, federal, state or local income, gift, estate, generation-skipping transfer, or inheritance tax.

2003, c. 910, §§ 6.1-32.30:1; 6.1-32.30:7; 2010, c. 794.

§ 6.2-1075. Organization; minimum capital; notice to Bureau; control.

A. No person other than a corporation or limited liability company organized under the laws of the Commonwealth to engage exclusively in the private trust business shall act as a private trust company.

B. No person may act as a private trust company unless and until family members have subscribed for capital stock or interests, surplus, and a reserve for operation in an amount equal to or in excess of $500,000.

C. No person shall engage in business as a private trust company without first giving written notice to the Bureau. The notice shall identify (i) the designated relative whose relationship to other individuals determines whether the individuals are family members and (ii) the location of the principal office and additional office, if any, within the Commonwealth. The notice shall be accompanied by an operating plan and such other books, records, documents, or information as the Commissioner may require. The notice shall also certify that (a) all provisions of law have been complied with; (b) the private trust company is formed for no other reason than to engage in the private trust business; and (c) family members have subscribed for capital stock, surplus, and a reserve for operation in an amount equal to or in excess of $500,000.

D. All of the capital stock, membership interests, or other equity interests of a private trust company shall be and shall remain owned by, and under the voting control of, family members, including any spouses, trusts, stock corporations, limited partnerships, limited liability companies, or estates qualifying under subdivision 2, 3, 4, or 5 of the definition of "family member" set forth in § 6.2-1074, of one or more families.

2003, c. 910, § 6.1-32.30:2; 2010, c. 794.

§ 6.2-1076. Operation and powers.

Every private trust company shall have and shall conduct its business in accordance with an operating plan and in accordance with generally accepted fiduciary standards. A private trust company when engaging in a private trust business shall have the same rights, powers, and privileges as a trust institution pursuant to § 6.2-1002, including the power to act as executor under the last will and testament or administrator of the estate of any deceased family member.

2003, c. 910, § 6.1-32.30:3; 2010, c. 794.

§ 6.2-1077. Reacquisition of shares or interests; dividends.

A private trust company shall not purchase, redeem, or otherwise reacquire shares of stock or membership interests that the private trust company has issued, or declare a dividend or other distribution to its stockholders, members, or holders of equity interests, to the extent that such purchase, redemption, reacquisition, dividend, or distribution shall cause the private trust company's paid-in capital, retained surplus and reserves to be reduced below $500,000.

2003, c. 910, § 6.1-32.30:4; 2010, c. 794.

§ 6.2-1078. Offices.

A. The office at which a private trust company begins business shall be designated initially as its principal office. The board of directors or managers of a private trust company may thereafter redesignate as the principal office another authorized office of the private trust company in the Commonwealth.

B. The board of directors or managers of a private trust company may designate, and from time to time redesignate, one additional office at which the private trust company may conduct business in the Commonwealth.

C. The private trust company shall notify the Bureau of any such redesignation of its principal office or designation or redesignation of an additional office not later than 30 days before its effective date and shall confirm to the Bureau any such designation or redesignation within 10 days of its occurrence.

2003, c. 910, § 6.1-32.30:5; 2010, c. 794.

§ 6.2-1079. Directors or managers.

The affairs of every private trust company shall be directed by a board of directors if a corporation, or managers if a limited liability company, consisting of not less than five nor more than 25 persons. At least one director or manager shall be a citizen of the Commonwealth.

2003, c. 910, § 6.1-32.30:6; 2010, c. 794.

§ 6.2-1080. Limitation on powers.

A. In the exercise of any power held by a private trust company in its capacity as a fiduciary, the private trust company shall have a duty not to exercise any power in such a way as to deprive the estate, trust, or other entity for which it acts as a fiduciary of an otherwise available tax exemption, deduction, or credit for tax purposes or deprive a donor of trust assets of a tax exemption, deduction, or credit or operate to impose a tax upon a donor or other person as owner of any portion of the estate, trust, or otherwise.

B. Without limitation to subsection A, no family member who is a stockholder or member or who otherwise holds an equity interest in, or is serving as a director, officer, manager, or employee of, a private trust company shall participate in or otherwise have a voice in any discretionary decision by the private trust company to distribute income or principal of any trust in order to discharge a legal obligation of the family member or for the family member's pecuniary benefit, unless:

1. The exercise of the discretion is limited by an ascertainable standard relating to the health, education, support, or maintenance of that family member;

2. The distribution is necessary for that family member's support, health, or education; or

3. The instrument governing the administration of that trust clearly so provides.

2003, c. 910, § 6.1-32.30:7; 2010, c. 794.

Article 6 - TRUST POWERS OF SAVINGS INSTITUTIONS

§ 6.2-1081. Definitions.

As used in this article, unless the context requires a different meaning:

"Affiliate" means, with respect to an association, a bank holding company, as defined in 12 U.S.C. § 1841, or savings and loan holding company of which the association is a subsidiary, a corporation that is also a subsidiary of a bank holding company or savings and loan holding company of which the association is a subsidiary, a corporation with respect to which the association owns 25 percent or more of the outstanding voting shares of such corporation, or any other corporation that the Commissioner determines is, in fact, controlled by the association.

"Association" has the meaning assigned to it in § 6.2-1100.

"Common trust funds" means common trust funds that are described under § 584 of the Internal Revenue Code of 1954, as well as any other type of collective investment fund that is exempt from federal income taxation under any other provision of the Internal Revenue Code or regulations issued pursuant thereto.

"Fiduciary" means the status resulting from an association's undertaking to act alone, through an affiliate, or jointly with others, primarily for the benefit of another, and includes an association's acting as trustee, executor, administrator, committee, guardian, conservator, receiver, managing agent, registrar of stocks and bonds, escrow, transfer, or paying agent, trustee of employee pension, welfare and profit sharing trusts, and in any other similar capacity.

"Fiduciary records" means all matters which are written, transcribed, recorded, received, or otherwise come into the possession of an association and are necessary to preserve information concerning the actions and events relevant to the fiduciary activities of an association.

"Governing instrument" means the written document or documents pursuant to which an association undertakes to act in a fiduciary capacity, and includes a will, codicil, deed of trust, trust deed, and other similar instruments.

"Investment authority" means the responsibility conferred by action of law or a provision of a governing instrument to make, select, or change investments, review investment decisions made by others, or to provide investment advice or counsel to others.

"Managing agent" means the fiduciary relationship assumed by an association upon the creation of an account that names the association as agent and confers investment authority upon the association.

"Savings institution holding company" has the meaning assigned to it in § 6.2-1100.

"Trust account" means the account established pursuant to a trust, estate, or other fiduciary relationship that has been established with an association.

"Trust department" means that group or groups of officers and employees of an association, or of an affiliate of an association, to whom are assigned the performance of fiduciary services by the association.

"Uniform Transfers to Minors Act" means Chapter 19 (§ 64.2-1900 et seq.) of Title 64.2 or any comparable act in effect in any other state.

1984, c. 303, § 6.1-195.78; 1997, c. 801; 2010, c. 794.

§ 6.2-1082. Applications for permission to offer trust services.

A. An association desiring to exercise fiduciary powers, either through a trust department or through an affiliate, shall file with the Commission an application indicating which trust services it wishes to offer and providing the information necessary to make the determinations required under subsection B.

B. In addition to assessing any other facts or circumstances deemed proper, the Commission, in passing upon an application to exercise trust powers, shall not grant such application unless the Commission finds that:

1. The association's capital structure is sufficiently strong to support such additional undertaking;

2. The personnel who will direct the proposed trust department have adequate experience and training, and will devote sufficient time to its affairs to ensure compliance with the law and to protect the association against surcharge;

3. The granting of trust powers to the association will be in the public interest; and

4. The association has available legal counsel to advise and pass upon fiduciary matters wherever necessary.

1984, c. 303, § 6.1-195.79; 2010, c. 794.

§ 6.2-1083. Commission to issue certificate; powers of associations authorized to offer trust services.

A. Upon granting the application of an association to exercise trust powers, the Commission shall issue a certificate authorizing the association or affiliate to exercise trust powers and offer fiduciary services. Unless such certificate otherwise provides, such association shall have the following rights, powers, and privileges, and shall be subject to the following regulations and restrictions:

1. To act as agent for any person, including any locality or state, for the collection or disbursement of interest, or income or principal of securities;

2. To act as the fiscal or transfer agent of any state, locality, or other body public or corporate, and in such capacity to receive and disburse money, to transfer, register and countersign certificates of stock, bonds, or other evidences of indebtedness;

3. To act as agent of any corporation, foreign or domestic, for any lawful purpose;

4. To act as trustee under any deed of trust, mortgage, or bond issued by an individual, municipality, or body politic or corporate, and to accept and execute any other municipal or corporate trust not inconsistent with the laws of the Commonwealth;

5. To act as a guardian, conservator, as a custodian under the Uniform Transfers to Minors Act (§ 64.2-1900 et seq.), and as depository of any money paid into court, whether for the benefit of a person under a disability or other person;

6. To take, accept, and execute any and all trusts and powers, of whatever nature and description, as may be conferred upon or entrusted or committed to it by any person, or any body politic or corporate, or by other authority, by grant, assignment, transfer, devise, bequest, or otherwise or as may be entrusted or committed or transferred to it or vested in it by order of any circuit court, judge, or clerk; to receive and hold any property or estate, real or personal, which may be the subject of any such trust; and to be accountable to all parties in interest for the faithful discharge of every such trust, duty, or power which it may so accept; and

7. To act as executor under the last will and testament, or administrator of the estate, of any deceased person, under appointment of any circuit court, judge, or clerk thereof, having jurisdiction of the estate of such deceased person.

B. Nothing in this chapter shall be construed as authorizing the creation of a trust not lawful as between individuals, nor to prohibit the deposit of funds by courts and fiduciaries in savings and loan associations and savings banks.

C. All rights, powers, and privileges, and all regulations, restrictions, and limitations, granted to or made applicable to associations by the provisions of this chapter shall likewise apply to any affiliate of an association which is authorized by the Commission to exercise trust powers. Any such affiliate shall be organized and operated solely for the purpose of offering trust services pursuant to the provisions of this chapter.

D. All federal savings and loan associations and federal savings banks, that have been, or hereafter may be, permitted by law to act in any fiduciary capacity, shall have the rights, powers, privileges, and immunities conferred by this chapter to the extent permitted by federal law.

1984, c. 303, § 6.1-195.80; 1997, c. 801; 2010, c. 794.

§ 6.2-1084. Continuation of trust powers in the event of consolidation or merger of two or more associations.

If an association consolidates or merges with another association or a bank and the association has, prior to such consolidation or merger, exercised trust powers under a certificate issued by the Commission, which certificate is in effect at the time of the consolidation or merger, the rights existing under such certificate shall pass to the resulting corporation. The resulting corporation may exercise such trust powers in the same manner and to the same extent as the association to which such certificate was originally issued. No new application to continue to exercise such powers is necessary. If the name of the resulting corporation differs from that of the association to which the right to exercise trust powers was originally granted, the Commission shall issue a certificate showing the right of such resulting corporation to exercise the trust powers theretofore granted to any of the associations participating in the consolidation or merger.

1984, c. 303, § 6.1-195.81; 2010, c. 794.

§ 6.2-1085. When security not required.

No association with a minimum combined unimpaired capital and surplus of $50,000 or more shall be required by any officer or court of the Commonwealth to give security upon appointment to or acceptance of any fiduciary office which it may, by law, be authorized to execute, or to give security upon any bond given pursuant to § 19.2-386.6 or similar statute. No association shall qualify on an estate having a value in excess of its combined unimpaired capital and surplus without giving security for such excess on its bond, unless the giving of such security is waived under the terms of the governing instrument or by court order.

1984, c. 303, § 6.1-195.82; 1993, c. 866; 2010, c. 794; 2012, cc. 283, 756.

§ 6.2-1086. Association's operation and supervision of trust department.

A. The board of directors of an association is responsible for the proper exercise of fiduciary powers by the association. All matters pertinent thereto, including the determination of policies, the investment and disposition of property held in a fiduciary capacity, and the direction and review of the actions of all officers, employees, and committees utilized by the association in the exercise of its fiduciary powers, are the responsibility of the board. In discharging this responsibility, the board of directors may assign, by action duly entered in the minutes, the administration of such of the association's trust powers as it may consider proper to assign to such directors, officers, employees, or committees as it may designate.

B. No fiduciary account shall be accepted without the approval of the directors, officers, or committees to whom the board may have assigned the performance of that responsibility. A written record shall be made of such acceptances and of the relinquishment or closing out of all fiduciary accounts.

C. Upon the establishment of a trust account for which the association has investment authority, a prompt review of the assets of such account shall be made. The board of directors shall also ensure that at least once during every calendar year thereafter, and within 15 months of the last review, all the assets held in or held for each trust account for which the association has investment authority are reviewed to determine the advisability of retaining or disposing of such assets. The board of directors shall act to ensure that all investments have been made in accordance with the terms and purposes of the governing instrument and in accordance with applicable law.

D. The trust department may utilize personnel and facilities of other departments of the association, and other departments of the association may utilize personnel and facilities of the trust department to the extent not otherwise prohibited by the law.

E. Every association exercising trust powers shall adopt written policies and procedures to ensure that the securities laws of the United States and the Commonwealth are complied with in connection with any decision or recommendation to purchase or sell any security. Such policies and procedures, in particular, shall ensure that the association's trust department shall not use material inside information in connection with any decision or recommendation to purchase or sell any security.

F. Every association exercising fiduciary powers shall designate, employ, or retain legal counsel who shall be readily available to pass upon fiduciary matters and to advise the association and its trust department.

1984, c. 303, § 6.1-195.83; 2010, c. 794.

§ 6.2-1087. Books and accounts.

Every association exercising trust powers shall keep its fiduciary records separate and distinct from other records of the association. All fiduciary records shall be so kept and retained for such time as to enable the association to furnish such information or reports with respect thereto as may be required by the Commissioner. The fiduciary records shall contain full information relative to each account. Every association shall also keep an adequate record of all pending litigation to which the association is a party in connection with its exercise of trust powers.

1984, c. 30, § 6.1-195.84; 2010, c. 794.

§ 6.2-1088. Investment of funds and assets held as fiduciary.

Funds and assets held by an association in a fiduciary capacity shall be invested in accordance with the provisions of the governing instrument. When such instrument does not specify the character or class of investments to be made and does not vest in the association, its directors, or its officers absolute and uncontrolled investment discretion in the matter, funds and assets held pursuant to such instrument shall be invested in any investment in which fiduciaries may invest under the provisions of Chapter 15 (§ 64.2-1500 et seq.) of Title 64.2. An association acting as fiduciary under appointment by a court may likewise invest in any investments in which fiduciaries may invest under the provisions of Chapter 15 (§ 64.2-1500 et seq.) of Title 64.2 unless otherwise provided by order of the appointing court. Unless the governing instrument or order establishing the fiduciary relationship provides otherwise, funds and assets held by an association in a fiduciary capacity may also be invested in common trust funds and collective investment funds pursuant to the provisions of § 6.2-1095.

1984, c. 303, § 6.1-195.85; 2010, c. 794.

§ 6.2-1089. Funds awaiting investment or distribution.

A. Funds and assets held in a fiduciary capacity by an association awaiting investment or distribution shall not be held uninvested or undistributed any longer than is reasonable for the proper management of the trust account.

B. Funds and assets held in trust by an association, including managing agency accounts, awaiting investment or distribution, unless prohibited by the governing instrument, may be deposited in other departments of the association, provided that the association shall first set aside under the sole control of the trust department, as collateral security:

1. Direct obligations of the United States, or other obligations fully guaranteed by the United States as to principal and interest;

2. Readily marketable securities of the classes in which fiduciaries are authorized or permitted to invest trust funds, as set forth in § 64.2-1502; or

3. Other readily marketable securities as may be authorized by the Commissioner.

Such collateral securities, or securities substituted therefor as collateral, shall at all times be at least equal in face value to the amount of trust funds so deposited, but such security shall not be required to the extent that the funds so deposited are insured by the Federal Deposit Insurance Corporation or other federal insurance agency. The requirements of this subsection are met when qualifying assets of the association are pledged in such manner as to fully secure all trust account funds deposited by the trust department of the association in another department of the association.

C. Any funds held by an association as fiduciary awaiting investment or distribution and deposited in other departments of the association shall be made productive.

D. In the event of the failure or liquidation of an association, the owners of the funds held in trust and deposited in another department of the association shall have a first lien on the securities set apart as collateral for such funds, in addition to any other claim that such owners may have against the association.

1984, c. 303, § 6.1-195.86; 1990, c. 3; 1992, c. 810; 2010, c. 794.

§ 6.2-1090. Dealings with self or affiliates.

A. Unless authorized by the governing instrument or by court order, funds held by an association as fiduciary shall not be invested in stock or obligations of, or property acquired from, the association or its affiliates or their directors, officers, or employees, or organizations in which the association or its affiliates or their officers, directors, or employees possess such an interest as might affect the exercise of the best judgment of the association in acquiring the stock, obligations, or property.

B. Property held by an association as fiduciary shall not be sold or transferred, by loan or otherwise, to the association or its affiliates or their directors, officers, or employees, or to organizations in which the association or its affiliates or their officers, directors, or employees possess such an interest as might affect the exercise of the best judgment of the association in selling or transferring such property, except:

1. When lawfully authorized by the governing instrument or by court order;

2. In cases in which the association has been advised by its legal counsel in writing that it has incurred, as fiduciary, a contingent or potential liability, and the association desires to relieve itself from such liability, in which case such sale or transfer may be made with the approval of the board of directors and the Commissioner, provided that in all such cases the association, upon the consummation of the sale or transfer, shall make reimbursement in cash at no loss to the trust account;

3. As provided in §§ 6.2-1089 and 6.2-1094; or

4. When required by the Commissioner.

C. If the retention of stock or obligations of the association or its affiliates is authorized by the governing instrument or court order, the association may exercise rights to purchase its own stock or the stock of its affiliates, or securities convertible into such stock, when such rights are offered pro rata to all stockholders of the association or its affiliates, as the case may be. When the exercise of such rights or the receipt of a stock dividend results in fractional shareholdings, additional fractional shares may be purchased to complement the fractional shares so acquired. In elections of directors, shares of an association or its affiliates held by the association as sole fiduciary, whether in its own name as fiduciary or in the name of its nominee, may not be voted by the association or its nominee unless, under the terms of the governing instrument or a court order, the manner in which such shares shall be voted may be directed by a donor or beneficiary of the trust account, and the donor or beneficiary actually directs how the shares will be voted. In addition, where the association is acting as sole fiduciary with respect to a trust account containing voting shares of the association or its affiliates, the association may, in accordance with the provisions of subsection B of § 6.2-1091, petition an appropriate court for appointment of a co-fiduciary for the purpose of voting such shares.

1984, c. 303, § 6.1-195.87; 2010, c. 794.

§ 6.2-1091. Voting of financial institution stock held by association as fiduciary; when association disqualified from voting.

A. When voting shares of a financial institution are held by an association in a trust account, the association may not vote or participate in the voting of any such shares if the securities held in such fiduciary capacity, together with all the other voting securities of such financial institution held in a fiduciary capacity by the association and its affiliates, exceed 25 percent of the outstanding voting securities of such financial institution. If the voting securities of any financial institution held by an association in a trust account, together with all other voting securities of such financial institution held in a fiduciary capacity by the association and its affiliates, exceed five percent of the outstanding voting securities of such financial institution, but less than 25 percent thereof, the association may not vote or participate in the voting of any such voting securities unless there has been a determination by the Commissioner that the right to vote such shares does not constitute control of the particular financial institution in question.

B. If any person is acting as fiduciary, in addition to the association, for the trust account containing such voting securities, such other fiduciary, if not a director, officer, or employee of the association or its affiliates, may vote such shares. If the association is the sole fiduciary for the trust account, the association may petition an appropriate court for the appointment of a co-fiduciary for the sole purpose of voting such shares. Such appointment and qualification may be ex parte, and no prior notice to the beneficiaries of the trust account shall be required. The court at the time of such qualifications may relieve the co-fiduciary of any obligation for the giving of security on his bond. If the appointment of the co-fiduciary is limited to voting such shares, such order may provide that the co-fiduciary shall not be liable or accountable in the administration of the trust account, except for the breach of any fiduciary duty in voting or failing to vote such shares. No director, officer, or employee of the petitioning association or its affiliates shall be eligible to be named co-fiduciary under the provisions of this section.

C. The provisions of this section shall also apply in the case of voting shares of a bank holding company, as defined in 12 U.S.C. § 1841, or a savings and loan holding company held by an association in a fiduciary capacity.

1984, c. 303, § 6.1-195.88; 2010, c. 794.

§ 6.2-1092. Transactions between trust accounts.

A. An association may sell assets held by it as fiduciary in one trust account to itself as fiduciary in another trust account if the transaction is fair to both accounts and if such transaction is not prohibited by the terms of the governing instruments, court order, or the law of the Commonwealth.

B. An association may make a loan to a trust account from the funds belonging to another such account, when the making of such loan to a designated trust account is authorized by the governing instrument creating the account from which such loans are made, or by court order, and the terms of the transaction are fair to all of the trust accounts involved.

C. An association may make a loan to a trust account and may take as security therefor assets of the account, provided such transaction is fair to such account and is not otherwise prohibited by the governing instrument, by court order, or by the law of the Commonwealth.

1984, c. 303, § 6.1-195.89; 2010, c. 794.

§ 6.2-1093. Custody of assets and investments held in trust.

A. The assets and investments of each trust account shall be kept separate from the assets of the association and shall be placed in the joint custody or control of not fewer than two of the officers or employees of the association designated for that purpose by the board of directors of the association. All such officers and employees shall be adequately bonded.

B. The assets and investments of each trust account shall be either kept separate from those of all other trust accounts, except as provided in § 6.2-1095, or otherwise adequately identified as the property of the relevant account.

1984, c. 303, § 6.1-195.90; 2010, c. 794.

§ 6.2-1094. Establishment of common trust funds and collective investment funds; court accountings.

A. Any association authorized by the Commission to offer fiduciary services may establish and maintain one or more common trust funds for the collective investment of funds held in a fiduciary capacity by it. The association may include, in such common trust fund or funds established and maintained by it, funds held in a fiduciary capacity by any affiliate of the association.

B. An association may invest funds held by it in any fiduciary capacity in one or more common trust funds, provided (i) such investment is not prohibited by the governing instrument or court order creating such fiduciary relationship; (ii) in the case of co-fiduciaries, the written consent of the co-fiduciary is obtained by the association; and (iii) the association has no interest in the assets of the common trust fund other than as a fiduciary.

C. Unless ordered by an appropriate court, an association operating a common trust fund or funds shall not be required to render a court accounting with regard to such fund or funds, but, by application to an appropriate court, such association may secure approval of such an accounting on such conditions as the court may establish. Nothing contained herein shall affect the duties of the fiduciaries of the trust accounts participating in the common trust fund to render accounts of their several trusts.

1984, c. 303, § 6.1-195.91; 2010, c. 794.

§ 6.2-1095. Compensation of association acting as fiduciary.

A. If the amount of the compensation for acting in a fiduciary capacity is not provided for in the governing instrument or otherwise agreed to by the parties, an association acting in such capacity may charge or deduct reasonable compensation for its services. When the association is acting in a fiduciary capacity under appointment by a court, it shall receive such compensation as may be allowed or approved by that court.

B. No association, except with the specific approval of its board of directors, shall permit any of its officers or employees, while serving as such, to retain any compensation for acting as a co-fiduciary with the association in the administration of any trust account undertaken by it.

C. No association shall permit an officer or employee engaged in the operation of its trust department to accept a devise, bequest, or gift of trust account assets, unless the devise, bequest, or gift is directed or made by a relative of such officer or employee, or is approved by the board of directors of the association.

1984, c. 303, § 6.1-195.92; 2010, c. 794.

§ 6.2-1096. Surrender of trust powers by association.

Any association that has been granted the right to exercise trust powers and that desires to surrender such rights shall file with the Commission a certified copy of the resolution of its board of directors signifying such desire. Upon receipt of such resolution, the Commission shall make an investigation. If the Commission is satisfied that the association has been properly discharged from all fiduciary duties that it has undertaken, the Commission shall issue a certificate to such association certifying that it is no longer authorized to exercise fiduciary powers. Upon issuance of such a certificate by the Commission, an association shall no longer be subject to the provisions of this article and shall not exercise thereafter any of the powers granted by this article without first applying for and obtaining a new authorization to exercise such powers.

1984, c. 303, § 6.1-195.93; 2010, c. 794.

§ 6.2-1097. Effect on trust accounts of appointment of receiver for association or of voluntary dissolution of association.

A. If a receiver is appointed for an association, the receiver shall, pursuant to the orders of the Commission and of any court having jurisdiction, proceed to close such of the association's trust accounts as can be closed promptly and shall promptly transfer all other such accounts to substitute fiduciaries.

B. If an association exercising trust powers commences a voluntary dissolution, the liquidating agent shall proceed at once to liquidate the affairs of the trust department as follows:

1. All trusts and estates over which a court is exercising jurisdiction shall be closed or disposed of as soon as practicable in accordance with the orders or instructions of such court;

2. All other trust accounts which can be closed promptly shall be closed as soon as practicable and final accountings made therefor; and

3. All remaining trust accounts shall be transferred by appropriate legal proceedings to substitute fiduciaries.

1984, c. 303, § 6.1-195.94; 2010, c. 794.

§ 6.2-1098. Revocation of trust powers.

A. If, in the opinion of the Commission, an association is unlawfully or unsoundly exercising, or has unlawfully or unsoundly exercised, or has failed for a period of five consecutive years to exercise, the powers granted by this chapter, or otherwise fails or has failed to comply with the requirements of this chapter, the Commission may issue and serve upon the association a notice of intent to revoke the authority of the association to exercise the powers granted by this chapter. The notice shall contain a statement of the facts constituting the alleged unlawful or unsound exercise of powers, or failure to exercise powers, or failure to comply, and shall fix a time and place at which a hearing will be held before the Commission to determine whether an order revoking authority to exercise such powers should issue against the association.

B. Such hearing shall be conducted in accordance with the Commission's Rules, and shall be fixed for a date not earlier than 30 days and not later than 60 days after the service of such notice, unless an earlier or later date is set by the Commission at the request of the association so served.

C. Unless the association so served shall appear by a duly authorized representative, it shall be deemed to have consented to the issuance of the revocation order. In the event of such consent or if, upon the record made at any such hearing, the Commission shall find that any allegation specified in the notice of charges has been established, the Commission shall issue and serve upon the association an order prohibiting it from accepting any new or additional trust accounts and revoking authority to exercise any and all powers granted by this chapter, except that such order shall permit the association to continue to service all previously accepted trust accounts pending their expeditious divestiture or termination.

D. A revocation order shall become effective not later than the expiration of 30 days after service of such order upon the association and shall remain effective and enforceable, except to such extent as it is stayed, modified, terminated, or set aside by action of the Commission or a reviewing court. In the case of a revocation order issued upon the consent of an association, such order shall become effective at the time specified therein.

1984, c. 303, § 6.1-195.95; 2010, c. 794.

§ 6.2-1099. Trust powers of state savings banks.

State savings banks, and their subsidiaries and affiliates, may exercise fiduciary powers in the same manner as associations pursuant to this article.

1991, c. 230, § 6.1-194.138; 2010, c. 794.

Chapter 11 - SAVINGS INSTITUTIONS

Article 1 - General Provisions

§ 6.2-1100. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Account" means any account with a savings institution and includes a checking, time, interest, or savings account.

"Association" means a savings and loan association or building and loan association that is authorized by law to accept deposits and to hold itself out to the public as engaged in the savings and loan business.

"Branch office" means an office of a savings institution where, in addition to conducting other business activities of the institution, the institution accepts deposits.

"Federal financial institution" means a financial institution incorporated or organized in accordance with the laws of the United States.

"Federal savings institution" means a savings institution incorporated or organized in accordance with the laws of the United States.

"Financial institution holding company" has the meaning assigned to it in § 6.2-700.

"Foreign savings institution" means a savings institution incorporated under the laws of a state other than the Commonwealth, the principal business office of which is located outside the Commonwealth. "Foreign savings institution" does not include a savings institution incorporated under the laws of the United States.

"Home loan" means a real estate loan the security for which is a lien on real estate comprising a single-family dwelling or a dwelling unit for four or fewer families in the aggregate.

"Insured savings institution" means a savings institution whose accounts are insured by the Federal Deposit Insurance Corporation or other federal insurance agency.

"Liquid assets" means (i) cash on hand; (ii) cash on deposit in Federal Home Loan Banks, Federal Reserve Banks, savings institutions, or in commercial banks that is withdrawable upon not more than 30 days' notice and that is not pledged as security for indebtedness; (iii) the liquid asset fund of the United States League of Saving Institutions; (iv) obligations of, or obligations that are fully guaranteed as to principal and interest by, the United States; or (v) any other asset that the Commissioner designates as a liquid asset. Any deposits in financial institutions under the control or in the possession of any supervisory authority are not liquid assets.

"Main office" means the office where a savings institution first commences to do business or, if the savings institution has more than one office, the office designated by the institution's board of directors as the institution's main office.

"Manufactured building" means a manufactured home or other structure designed for use as a dwelling or business facility that is manufactured and assembled at a location other than the site where such manufactured home or other structure is placed for use as a dwelling or business facility, or both.

"Member" means a person (i) holding a savings account of a mutual association, (ii) borrowing from a mutual association, (iii) assuming or obligated upon a loan or interest therein held by a mutual association, or (iv) purchasing real estate securing a loan or interest therein held by a mutual association. "Member" includes such persons with a joint and survivorship or other multiple owner or borrower relationship, which persons shall constitute a single membership for purposes of this chapter.

"Mutual association" means an association that is organized and operated exclusively for the benefit of its members and that does not issue shares of capital stock.

"Mutual savings institution" means a savings institution that is organized and operated exclusively for the benefit of its members and that does not issue shares of capital stock.

"Real estate loan" means:

1. A loan on the security of any instrument, whether a mortgage, deed of trust, or land contract, that makes the interest in real estate described therein, whether in fee or in a leasehold or subleasehold extending or renewable automatically or at the option of the holder, or at the option of the savings institution, for a period of at least 10 years beyond the maturity of the loan, specific security for the payment of the obligations secured by the instrument; or

2. A loan, or interest therein, secured by cooperative housing units on the security of (i) a security interest in the stock or membership certificate issued to a tenant-stockholder or resident member of a cooperative housing corporation, as defined in § 13.1-501, coupled with (ii) the assignment by way of security of the borrower's interest in the proprietary lease or other right of tenancy in the property owned by such corporation.

"Savings account" means an interest-bearing account not subject to withdrawal by check or other negotiable instrument.

"Savings bank" means a savings institution specifically chartered under the laws of the Commonwealth, another state or a territory of the United States, the District of Columbia, or the United States as a savings bank. The term savings bank does not include a savings and loan association or building and loan association.

"Savings institution" means a savings and loan association, a building and loan association, or savings bank, whether organized as a capital stock corporation or a nonstock corporation, that is authorized by law to accept deposits and to hold itself out to the public as engaged in the savings institution business.

"Savings institution holding company" means any person who, directly or indirectly, or acting in concert with one or more other companies or with one or more subsidiaries or affiliates, acquires, owns, controls or holds with power to vote 25 percent or more of the voting shares of a stock savings institution, or which controls in any manner the election of a majority of the directors of such institution.

"Service corporation" means a stock corporation, all of the stock of which is owned (i) directly by one or more savings institutions or (ii) indirectly through a subsidiary or subsidiaries of one or more savings institutions.

"State association" means an association incorporated under the laws of the Commonwealth.

"State bank" means a bank incorporated under the laws of the Commonwealth and that has its principal business office in the Commonwealth.

"State savings bank" means a savings bank organized and incorporated under the provisions of this chapter. A state savings bank shall not be subject to the provisions of this chapter applicable only to state associations.

"State savings institution" means a savings institution incorporated under the laws of the Commonwealth.

"Stock association" means an association that issues shares of capital stock.

"Stock institution" means a savings institution that issues shares of capital stock.

"Withdrawal value" means the amount credited to an account less lawful deductions therefrom, as shown by the records of the savings institution.

Code 1950, §§ 6-201.4, 6-201.5; 1960, c. 402; 1966, c. 584, 6.1-129, 6.1-130; 1970, c. 396; 1972, c. 796, § 6.1-195.4; 1975, c. 73; 1978, c. 14; 1980, c. 350; 1982, cc. 80, 224, § 6.1-195.57:1; 1985, c. 425, §§ 6.1-194.2, 6.1-194.40, 6.1-194.87; 1986, c. 500; 1988, c. 536; 1990, c. 3; 1991, cc. 228, 230, §§ 6.1-194.110, 6.1-194.131; 1996, cc. 16, 26; 1999, c. 77; 2010, c. 794.

§ 6.2-1101. Construction and application of chapter.

A. It is the intention of the General Assembly that this chapter shall be liberally construed to effect the purposes set out herein.

B. The provisions of this chapter shall apply to federal savings institutions and foreign savings institutions doing business in the Commonwealth insofar as the Commonwealth has the power to enact legislation with regard to them.

Code 1950, § 6-201.3; 1960, c. 402; 1966, c. 584, § 6.1-128; 1972, c. 796, § 6.1-195.3; 1985, c. 425, §§ 6.1-194.89, 6.1-194.90; 1991, c. 230, §§ 6.1-194.153, 6.1-194.154; 2010, c. 794.

§ 6.2-1102. Associations operating share accumulation loan plans; continued operation.

Notwithstanding any other provision of law with respect to the rates of interest that may be charged, an association that on September 1, 1959, was operating on a share accumulation loan plan whereby its earnings were equitably distributed to both its borrowers and its shareholders may continue to operate upon the same plan, but no additional loans shall be made or shares issued under such plan after July 1, 1974.

Code 1950, §§ 6-201.2; 1960, c. 402; 1966, c. 584, § 6.1-127; 1972, c. 796, § 6.1-195.2; 1974, c. 565; 1985, c. 425, § 6.1-194.91; 1986, cc. 500, 509; 1990, c. 3; 2010, c. 794.

§ 6.2-1103. Prohibitions on conduct of savings institution business; exceptions; penalty.

A. No person shall engage in the savings institution business in the Commonwealth except entities that are state associations, savings banks, federal savings institutions authorized to transact business in the Commonwealth, or foreign savings institutions that have been authorized to transact a savings institution business in the Commonwealth pursuant to the provisions of Article 5 (§ 6.2-1148 et seq.) of this chapter.

B. Nothing in this chapter shall prevent any person who is not authorized to engage in the savings institution business from lending money on real estate or personal security or collateral, or from guaranteeing the payment of bonds, notes, bills or other obligations, or from purchasing or selling stocks and bonds, so long as such person does not hold himself out as being engaged in the savings institution business.

C. Any person who violates this section is guilty of a Class 6 felony.

1985, c. 425, § 6.1-194.95; 1986, c. 509; 1992, c. 136; 2010, c. 794.

§ 6.2-1104. False statements and similar actions prohibited; penalty.

Any person who knowingly makes or causes to be made, directly or indirectly, or through any agency, any false statement or report, or willfully overvalues any land, property, or security, for the purpose of influencing in any way the action of any savings institution upon any application, advance, discount, purchase or repurchase agreement, commitment, or loan or any change or extension thereof, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security therefor, is guilty of a Class 1 misdemeanor.

1985, c. 425, § 6.1-194.93; 1986, c. 509; 2010, c. 794.

§ 6.2-1105. Use of savings institution name, logo, or symbol for marketing purposes; penalty.

A. Except as provided in subsection B, no person shall use the name, logo, or symbol, or any combination thereof, of a savings institution, or any name, logo, or symbol, or any combination thereof, that is deceptively similar to the name, logo, or symbol of a savings institution, in marketing material provided to or solicitation of another person in a manner such that a reasonable person may believe that the marketing material or solicitation originated from or is endorsed by the savings institution or that the savings institution is responsible for the marketing material or solicitation.

B. This section shall not apply to (i) an affiliate or agent of the savings institution or (ii) a person who uses the name, logo, or symbol of a savings institution with the consent of the savings institution.

C. Any person violating the provisions of this section, either individually or as an interested party, is guilty of a Class 1 misdemeanor.

D. This section shall not affect the availability of any remedies otherwise available to a savings institution.

2005, c. 240, § 6.1-194.93:1; 2010, c. 794.

§ 6.2-1106. Prohibitions on the use of certain terms; exceptions; penalty.

A. No person not engaged in the business of a savings institution in the Commonwealth under the provisions of this chapter shall use any sign having thereon any assumed or corporate name containing the words "savings and loan," "building and loan," "savings bank," or other words indicating that its office is the office of a savings institution; nor shall any such person use or circulate any written or printed material having thereon any assumed or corporate name or word or words indicating that the business of such person is that of a savings institution. However, the use of any of these terms in the name of any other corporation or in connection with any other business is not prohibited when additional words show clearly and definitely that the corporation is not, and that the business is not that of, a savings institution.

B. Any person who violates this section is guilty of a Class 6 felony.

1985, c. 425, § 6.1-194.95; 1986, c. 509; 1992, c. 136; 2010, c. 794.

§ 6.2-1107. Defamation of savings institutions and certain federal agencies prohibited; penalty.

No person shall willfully and knowingly make, issue, circulate, or transmit, or cause or knowingly permit to be made, issued, circulated, or transmitted, any statement or rumor, written, printed, reproduced in any manner, or by word of mouth, that is untrue in fact and is (i) malicious, in that it is calculated to injure reputation or business, and (ii) derogatory to the financial condition or standing of any savings institution or Federal Home Loan Bank. Any person who violates this section is guilty of a Class 2 misdemeanor.

Code 1950, § 6-201.52; 1960, c. 402; 1966, c. 584, § 6.1-182; 1972, c. 796, § 6.1-195.62; 1985, c. 425, § 6.1-194.94; 1990, c. 3; 2010, c. 794.

§ 6.2-1108. Membership in Federal Home Loan Bank and Federal Deposit Insurance Corporation authorized; insurance required as a condition to receiving deposits; representations that accounts are insured; misleading advertisements.

A. A savings institution may become a member of the Federal Home Loan Bank and the Federal Deposit Insurance Corporation or other federal insurance agency and conform to the provisions and regulations thereof.

B. Any savings institution doing business in the Commonwealth that does not have its accounts insured by the Federal Deposit Insurance Corporation or other federal insurance agency, up to the limits of the insurance provided thereby, shall not accept any deposits.

Code 1950, §§ 6-201.2, 6-201.20; 1960, c. 402; 1966, c. 584, §§ 6.1-127, 6.1-146; 1972, c. 796, §§ 6.1-195.2, 6.1-195.20; 1974, c. 565; 1985, c. 425, §§ 6.1-194.3, 6.1-194.91; 1986, cc. 500, 509; 1990, c. 3; 2010, c. 794.

§ 6.2-1109. Representations that accounts are insured; misleading advertisements.

A. A savings institution shall not make any representation, oral or written, that any of its accounts are insured or guaranteed unless such accounts are insured or guaranteed by an instrumentality of the United States or other insurer approved by the Commission.

B. A savings institution shall not publish any misleading advertisement.

Code 1950, § 6-201.53; 1960, c. 402; 1966, c. 584, § 6.1-183; 1972, c. 796, § 6.1-195.63; 1985, c. 425, § 6.1-194.92; 2010, c. 794.

§ 6.2-1110. Membership in facilitating organizations or instrumentalities.

A savings institution may become a member of, deal with, maintain reserves or deposits with, or make reasonable payments or contributions to, and comply with any reasonable requirements or conditions of eligibility of, any government or private organization or instrumentality to the extent that the organization or instrumentality assists in furthering or facilitating the institution's purposes, powers, services or community responsibilities. This section shall not be construed to permit a savings institution to establish deposit or reserve accounts with any financial institution or other entity if its accounts are not insured by federal agency or other insurer approved by the Commissioner.

1985, c. 425, § 6.1-194.4; 2010, c. 794.

§ 6.2-1111. Authority to purchase, convey or manage property in which state savings institution has a security interest; time limitation.

A. A state savings institution may:

1. Purchase at any sale, public or private, any real estate or personal property upon which it has a mortgage, judgment, deed of trust, pledge, lien or other encumbrance or in which it has any interest; and

2. Acquire any real or personal property that is conveyed or transferred to it in full or partial satisfaction, discharge or release of loans for which such property is security.

B. A state savings institution may sell, convey, lease, exchange, improve, repair, mortgage, convey in trust, pledge, or encumber any real or personal property purchased or acquired by it as authorized by subsection A.

C. A state savings institution may invest its funds in or manage or deal in property or invest its funds in or operate a business, when any of these actions are reasonably necessary to avoid loss on a loan or investment previously made or an obligation previously created in good faith. Such property or business shall not be held or operated by the state savings institution for a period in excess of six years unless specifically authorized by the Commissioner.

Code 1950, § 6-201.15; 1960, c. 402; 1966, c. 584, § 6.1-142; 1972, c. 796, § 6.1-195.16; 1985, c. 425, § 6.1-194.5; 2010, c. 794.

§ 6.2-1112. Applicability of Virginia Uniform Commercial Code to commercial paper and depository activities of savings institutions.

The definitions and provisions contained in Title 8.3A and Title 8.4 shall apply to the commercial paper and deposit account activities of savings institutions doing business in the Commonwealth, to the extent that such definitions and provisions are not inconsistent with the provisions of this chapter.

1985, c. 425, § 6.1-194.7; 1992, c. 693; 2010, c. 794.

§ 6.2-1113. Discoverability or admissibility of compliance review committee documents.

A. As used in this section, "compliance review committee" means a committee appointed by the board of directors of a savings institution for the purpose of evaluating and improving the savings institution's compliance with federal and state laws and adherence to its own established ethical and financial standards, and includes any other person when that person acts in an investigatory capacity at the direction of a compliance review committee.

B. Any records, reports, or other documents created by a compliance review committee are confidential and shall not be discoverable or admissible in evidence in any civil action unless, upon motion, the trial court determines in its discretion that there has been an abuse of the provisions of this section.

C. Any records, reports, or other documents produced by a compliance review committee and delivered to a federal or state governmental agency remain confidential and shall not be discoverable or admissible in evidence in any civil action, except to the extent that applicable law provides that such records, reports or other documents are not protected from disclosure.

D. In no event shall the existence of or any action by a compliance review committee serve as a basis or justification for delay of, or limit upon, the discovery process set forth in state or federal rules.

E. The work product created by any person acting in an investigatory capacity at the direction of a compliance review committee prior to his participation in the work of the compliance review committee or at the direction of the compliance review committee shall be subject to the rules governing discovery in accordance with the Rules of the Virginia Supreme Court.

F. This section shall not be construed to limit the discovery or admissibility:

1. In any civil action of any records, reports, or other documents that are not created by a compliance review committee; or

2. Of any factual information which may be reviewed by a compliance review committee.

1994, c. 201, §§ 6.1-2.16, 6.1-2.17, 6.1-2.18; 2010, c. 794.

Article 2 - INCORPORATION; CERTIFICATE OF AUTHORITY; CORPORATE ADMINISTRATION

§ 6.2-1114. Application of Virginia Stock Corporation Act and Virginia Nonstock Corporation Act.

A. The provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.) shall apply to all stock institutions in all cases not inconsistent with the provisions of this chapter, except the provisions of Article 15 (§ 13.1-729 et seq.) of Chapter 9 of Title 13.1 shall not apply.

B. The provisions of the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) shall apply to all mutual savings institutions in all cases not inconsistent with the provisions of this chapter including mutual savings and loan associations heretofore incorporated under the Virginia Stock Corporation Act or prior laws relating to stock corporations.

Code 1950, §§ 6-201.6, 6-201.7; 1960, c. 402; 1966, c. 584, §§ 6.1-131, 6.1-132; 1970, c. 399; 1972, c. 796, § 6.1-195.5; 1985, c. 425, § 6.1-194.8; 2010, c. 794.

§ 6.2-1115. Formation of state savings institutions.

A. A stock savings and loan association may be incorporated as provided in the Virginia Stock Corporation Act (§ 13.1-601 et seq.). A mutual savings and loan association may be incorporated as provided in the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.).

B. A stock savings bank may be formed by being incorporated as provided in the Virginia Stock Corporation Act (§ 13.1-601 et seq.). A mutual savings bank may be formed by being incorporated as provided in the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.).

Code 1950, § 6-201.8; 1960, c. 402; 1966, c. 584, § 6.1-133; 1972, c. 796, § 6.1-195.7; 1985, c. 425, § 6.1-194.9; 1991, c. 230, § 6.1-194.111; 2010, c. 794.

§ 6.2-1116. Corporation name.

A. Every association incorporated under the laws of the Commonwealth shall have as a part of its corporate name the words "building and loan association" or "savings and loan association." No state association shall use the words "savings bank" as part of its corporate name.

B. Every savings bank incorporated under the laws of the Commonwealth shall have as a part of its corporate name the words "savings bank."

C. The provisions of subsection A of § 13.1-630 shall not apply to any association or state savings bank.

Code 1950, § 6-201.9; 1960, c. 402; 1966, c. 584, § 6.1-134; 1972, c. 796, § 6.1-195.8; 1983, c. 387; 1985, c. 425, § 6.1-194.10; 1991, c. 230, § 6.1-194.112; 2010, c. 794.

§ 6.2-1117. Par value of shares; payment of shares; reacquisitions of shares or acceptance thereof as security; how subscriptions to stock to be paid; disposition of money received before institution opens; stock option plans.

A. Shares of stock issued by a stock institution shall be paid for in full in cash at not less than their par value upon issuance or, in the case of a stock institution then actively conducting operations, in property or services valued, with the approval of the Commission, at an amount not less than the aggregate value of the shares issued in exchange therefor. A stock institution may not purchase, redeem or otherwise reacquire shares of stock that it has issued and may not accept its shares of stock as security. A stock institution shall have the power to redeem or otherwise reacquire shares of its common or preferred stock to the same extent as commercial banks incorporated under the laws of the Commonwealth are permitted to do under this title.

B. Subscriptions to the capital stock of a stock institution shall be paid in money at not less than par. No stock institution shall begin business until the amount specified in its certificate of authority to commence business has been received by it.

C. All money received for subscriptions to or for purchases of stock of a stock institution before it opens for business shall be deposited in an escrow account in an insured financial institution or invested in United States government obligations, under the joint control of two organizing directors of the stock institution, both of whom shall be bonded for an amount not less than the total amount of money under their control. Such funds, together with any income thereon, less such organizational expenses as have been approved by the stock institution's board of directors, shall be remitted to the stock institution on the day it opens for business. If the stock institution is denied a certificate of authority, is refused insurance of accounts, or it is otherwise determined that the stock institution will not open for business, such funds, after payment of any amount owing for expenses in connection with such attempted organization, including reasonable consulting fees, attorney fees, salaries, filing fees, and other expenses, shall be refunded to subscribers or shareholders. The directors of the stock institution, individually, jointly and severally, shall be liable for any failure of the savings institution to refund such funds to the subscribers or shareholders. This liability may be enforced by a suit in equity instituted by one or more of the subscribers or stockholders on behalf of all against the stock institution and one or more of its directors.

D. The requirement that capital stock be paid in money shall not be construed to prohibit the establishment, as otherwise authorized by law, of stock option plans and stock purchase plans, and the issuance of stock pursuant to such plans. Such plans shall be established only after the stock institution has opened for business. Any such plan with respect to a stock association shall be established as follows:

1. The board of directors shall by resolution propose the stock option or stock purchase plan. The plan shall describe any effect the adoption of the plan is expected to have on the value of issued and outstanding shares of the association;

2. Notice of a meeting of stockholders, stating that the purpose or one of the purposes of the meeting is to consider the plan so proposed by the board of directors, shall be given to each stockholder of record entitled to vote thereon within the time and in the manner provided in Chapter 9 (§ 13.1-601 et seq.) of Title 13.1 for giving of notice of meetings of stockholders. A copy of the plan shall be included with such notice; and

3. At such meeting, the plan shall be adopted if approved by the affirmative vote of the holders of more than two-thirds of the shares entitled to vote thereon.

Any such plan with respect to a savings bank shall be adopted if approved by a majority vote of the institution's shareholders. In no event shall such a plan established by a stock savings bank provide that a stock option be granted at a price which is less than 100 percent of the book value per share of the stock as shown by the stock institution's last published statement prior to the granting of the option.

Code 1950, § 6-201.12; 1960, c. 402; 1966, c. 584, § 6.1-137; 1972, c. 796, § 6.1-195.11; 1981, c. 62; 1984, c. 136; 1985, c. 425, § 6.1-194.11; 1991, c. 230, § 6.1-194.113; 2010, c. 794.

§ 6.2-1118. Certificate of authority to do business.

A. Before any state savings institution may begin business in the Commonwealth, it shall obtain from the Commission a certificate of authority to do so. Prior to issuing a certificate, the Commission shall ascertain that:

1. All applicable provisions of law have been complied with;

2. If a mutual association, deposits in a total amount deemed by the Commission to be sufficient to warrant successful operation but not less than $2 million, have been pledged or deposited and that such deposits shall not be withdrawable for at least one year;

3. If a stock association, that financially responsible persons have subscribed for capital stock and surplus in an amount deemed by the Commission to be sufficient to warrant successful operation, provided that the capital stock shall have a paid-in value of not less than $2 million;

4. If a mutual savings bank, deposits in such amount as the Commission deems necessary for safe and sound operation, but not less than $1 million have been pledged or deposited and that such deposits are not subject to withdrawal for at least one year;

5. If a stock savings bank, that financially responsible persons have subscribed for capital stock in an amount deemed by the Commission to be sufficient to warrant successful operation, provided that the capital stock shall have a paid-in value of not less than $1 million;

6. Regulations governing directors of the association have been complied with;

7. The public interest will be served by the addition of the proposed savings institution facilities in the community where the savings institution is to be located. The addition of such facilities shall be deemed in the public interest if, based on all relevant evidence and information, advantages such as increased competition, additional convenience, or gains in efficiency outweigh possible adverse effects such as diminished or unfair competition, undue concentration of resources, conflicts of interests, or unsafe or unsound practices;

8. The officers and directors of the proposed savings institution demonstrate (i) moral fitness, (ii) financial responsibility, and (iii) business ability; and

9. The applicant has submitted evidence of (i) being fully insured by the Federal Deposit Insurance Corporation or other federal insurance agency or (ii) commitment by the Federal Deposit Insurance Corporation or other federal insurance agency that the applicant will be issued insurance of accounts immediately subsequent to the issuance of the certificate of authority. The Commission may issue a certificate conditioned upon the fact that the savings institution shall not commence to do business until it is issued insurance of accounts by the Federal Deposit Insurance Corporation or other federal insurance agency.

B. The minimum capital stock requirement under:

1. Subdivisions A 2 and A 3 shall apply when a state association is being organized to begin business and shall not apply when this section is referred to or used in connection with the conversion of an operating savings institution or bank to a state association, or when this section is used in connection with the reorganization of an operating state association under a holding company; and

2. Subdivisions A 4 and A 5 shall apply when a state savings bank is being organized to begin business and shall not apply when this section is referred to or used in connection with the conversion of an operating savings institution or bank to a state savings bank, or when this section is used in connection with the reorganization of an operating state savings bank under a holding company.

Code 1950, § 6-201.40; 1960, c. 402; 1966, c. 584, § 6.1-170; 1972, c. 796, § 6.1-195.47; 1973, c. 156; 1976, c. 658; 1979, c. 165; 1985, c. 425, § 6.1-194.12; 1986, c. 500; 1990, c. 3; 1991, c. 230, § 6.1-194.114; 1992, c. 460; 1996, c. 26; 1999, c. 95; 2010, c. 794.

§ 6.2-1119. Commissions and other fees for sale of stock not permitted.

The Commission shall not issue a certificate of authority to any state savings institution to commence business if commissions, fees, brokerage, or other compensation, however designated, have been paid or contracted to be paid by the savings institution or by anyone in its behalf, either directly or indirectly, to any person for the sale of stock in such savings institution. This section shall not be construed to prohibit a savings institution that has been issued a certificate of authority and has commenced operations from paying or contracting to pay such commissions or fees in connection with the issue or reissue of shares of stock of the savings institution.

1985, c. 425, § 6.1-194.13; 1991, c. 230, § 6.1-194.115; 2010, c. 794.

§ 6.2-1120. Minimum capital requirement.

A state savings bank shall comply with the applicable minimum capital requirements of the Federal Deposit Insurance Corporation. The Commission may impose such additional minimum capital requirements as it deems necessary in order to insure the safe and sound operation of state savings banks.

1991, c. 230, § 6.1-194.116; 2010, c. 794.

§ 6.2-1121. Board of directors.

A. The affairs of every state savings institution shall be managed by a board of directors of not less than five nor more than 25 persons. Every director of a stock savings institution shall be the owner in his own name and have in his personal possession or control, shares of stock in the savings institution of which he is a director that have a market value at the time such director is first elected to the board of not less than $500. Such shares of stock shall be unpledged, except as required to be pledged to a Federal Home Loan Bank, Federal Reserve Bank, or other federal agency, and unencumbered at the time of his becoming a director and during the whole of his term as director. If a stock savings institution is controlled by a savings institution holding company, a director may comply with the provisions of this section for each stock savings institution of which he is a director by ownership, in similar manner, of shares of capital stock of the holding company that have a market value at the time such director is first elected to the board of not less than $500.

B. Every director of a mutual state association shall have a savings account in the association of which he is a director, in his own name or jointly with his spouse, of not less than $500. A mutual state savings bank shall be subject to the requirements of subsection A, except that, in lieu of owning qualifying shares of stock in the savings bank, each director shall maintain, while a director, a savings account in the savings bank of not less than $500. Any account required by this subsection shall be unpledged, except as required to be pledged to a Federal Home Loan Bank, and unencumbered at the time of his becoming a director and during the whole term as director. The office of any director violating the provisions of subsection A or this subsection shall immediately become vacant.

C. Every director of a state savings institution, within 30 days after his election or reelection, shall take and subscribe to an oath that he (i) will diligently and honestly perform his duties as director and (ii) is the owner and has in his personal possession or control the shares of stock or savings account in the savings institution required by this section and, in the case of reelection or reappointment, that, during the whole of his immediate previous term as a director, such stock or account was not at any time pledged or encumbered in any other manner to secure a loan. The oath, subscribed to by the director and certified by the officer before whom it is taken, shall be transmitted to the Commission. Any director who fails for a period of 30 days after his election, reelection, appointment or reappointment to take the oath required by this subsection shall forfeit his office.

D. Within 60 days following the election or reelection of any person as a director of a state savings institution, the savings institution shall furnish such information to the Commission relative to the personal character, integrity, financial condition, and personal and business background of the director as the Commission shall from time to time prescribe. The report, under oath, shall be signed by the director as well as by a designated officer of the savings institution. Any person knowingly making a false statement in such a report shall be guilty of perjury, punishable as provided in § 18.2-434.

Code 1950, § 6-201.34; 1960, c. 402; 1966, c. 584, § 6.1-164; 1972, c. 796, § 6.1-195.41; 1974, c. 77; 1985, c. 425, § 6.1-194.14; 1986, c. 509; 1991, c. 230, § 6.1-194.117; 1992, c. 552; 1994, c. 105; 2010, c. 794.

§ 6.2-1122. Meetings of board of directors.

The board of directors of every state savings institution shall hold meetings at least once in every calendar month. At any meeting a majority of the whole board shall be necessary for the lawful transaction of business, unless the stockholders or members, by bylaw, have fixed another number, which in the case of a state savings bank shall be not less than five, as a quorum. The Commission may allow less frequent meetings, but not less often than quarterly.

Code 1950, § 6-201.35; 1960, c. 402; 1966, c. 584, § 6.1-165; 1972, c. 796, § 6.1-195.42; 1985, c. 425, § 6.1-194.15; 1991, c. 230, § 6.1-194.118; 2010, c. 794.

§ 6.2-1123. Notice of meetings of members; determining members entitled to notice or to vote.

A. A mutual savings institution shall give notice of its meetings of members as required by § 13.1-842 and shall post a copy of the notice in a conspicuous place in each office of the institution during the 14 days preceding the date of the meeting.

B. For the purpose of determining members entitled to notice of or to vote at any meeting of members or any adjournment thereof, or in order to make a determination of members for any other purpose, the board of directors of a mutual savings institution may provide that the membership shall be closed for a stated period but not to exceed, in any case, 50 days. In lieu of closing the membership, the bylaws or, in the absence of any applicable bylaw, the board of directors may fix in advance a date as the record date for any such determination of membership. Such date in any case shall not be more than 50 days prior to the date on which the particular action, requiring such determination of members, is to be taken. If the membership is not closed and no record date is fixed for the determination of members entitled to notice of or to vote at a meeting of members, the date on which notice of the meeting is mailed shall be the record date for such determination of membership. When a determination of members entitled to vote at any meeting of members has been made as provided in this section, the determination shall apply to any adjournment thereof.

Code 1950, § 6-201.38; 1960, c. 402; 1966, c. 584, § 6.1-168; 1972, c. 796, § 6.1-195.45; 1977, c. 46; 1985, c. 425, § 6.1-194.16; 2010, c. 794.

§ 6.2-1124. Voting rights; proxies.

The right of members of a mutual savings institution to vote may not be conferred or limited by the articles of incorporation. In the determination of all questions requiring action by the members, each member shall be entitled to cast one vote, plus an additional vote for each $100 or fraction thereof of the withdrawal value of savings accounts, if any, held by such member. No member, however, shall be entitled to cast more than 50 votes. At any meeting of the members, voting may be in person or by proxy, provided that no proxy shall be eligible to be voted at any meeting unless such proxy shall have been filed with the secretary of the institution, for verification, at least five days prior to the date of such meeting. Each proxy shall be in writing and signed by the member or his duly authorized attorney-in-fact and, when filed with the secretary, shall, unless otherwise specified in the proxy, continue in force from year to year until revoked by a writing duly delivered to the secretary of the institution or until superseded by subsequent proxies or upon the member's ceasing to be a member of the institution.

Code 1950, § 6-210.11; 1960, c. 402; 1966, c. 584, § 6.1-136; 1972, c. 796, § 6.1-195.10; 1985, c. 425; 2010, c. 794.

§ 6.2-1125. Access to books and records; communication with members.

A. Every person having an account or loan with a savings institution shall have the right to inspect the books and records of the institution that pertain to his loan or account. In all other situations the right to inspect and examine the institution's books and records shall be limited to:

1. The Commissioner or his duly authorized representatives;

2. Persons duly authorized to act for the institution; and

3. Any federal or state instrumentality or agency authorized to inspect or examine the books and records of such institution.

B. The books and records pertaining to the accounts and loans of a savings institution shall be kept confidential by the institution, its directors, officers, and employees except where the disclosure thereof shall be compelled by an appropriate court or otherwise required by law. No person shall have access to the books and records of the institution or shall be furnished or shall possess information concerning individual accounts or loans of the institution or concerning the owners of such accounts or borrowers, except as authorized in writing by the account owner or borrower or as otherwise expressly authorized by law. A savings institution is authorized to release, publish or furnish general information and statistical data concerning its accounts and loans, provided the identity of individual account owners or borrowers, and other confidential information, is not revealed.

C. If any member of a mutual savings institution desires to communicate with other members with reference to any questions pending or to be presented for consideration at a meeting of the members, the institution shall furnish upon request a statement of the approximate number of members of the institution at the time of such request and an estimate of the cost of forwarding such communication. The requesting member shall then submit the communication, together with a sworn statement that the proposed communication is not for any reason other than the business welfare of the institution, to the Commissioner. If the Commissioner finds the communication to be appropriate, truthful and in the best interest of the institution and its members, he shall execute a certificate setting out such findings, forward the certificate together with the communication to the institution, and direct that the communication be prepared and mailed by the institution to the members upon the requesting member's payment to it of the expenses of such preparation and mailing. If the Commissioner finds such proposed communication to be inappropriate, untruthful, or contrary to the best interest of the institution and its members, he may make any disposition of the request to communicate that he deems proper and he shall execute a certificate setting out such findings and deliver it to the requesting member together with his order making disposition of the request.

D. Insofar as the provisions of this section are not inconsistent with federal law, such provisions shall apply to federal savings institutions whose home offices are located in the Commonwealth, except that the communication and statement provided for in subsection C shall be tendered to the appropriate federal agency in the case of a federal savings institution and forwarded only upon that agency's certificate and direction.

E. Nothing in this section shall be construed to prohibit a savings institution from furnishing the names, addresses and telephone numbers of its customers to an affiliate of the institution or an entity with whom the institution has a direct contractual relationship, for purposes of furnishing financial services to the institution's customers. Such affiliate or entity shall not furnish such customer information to any third party without the written authorization of the customer.

Code 1950, § 6-201.39; 1960, c. 402; 1966, c. 584, § 6.1-169; 1972, c. 796, § 6.1-195.46; 1985, c. 425, § 6.1-194.18; 1988, c. 555; 1990, c. 3; 1994, c. 319; 2010, c. 794.

§ 6.2-1126. Audit of savings institution; report.

The directors of every savings institution shall, at least once in each calendar year, cause an independent audit by a certified public accountant to be made of the institution, its operation and its general books of account. The report of such audit shall be presented to the institution's board of directors at its next regular meeting after completion of the audit. The minutes of such meeting shall reflect that the audit report was presented and reviewed by the board, and a copy of the audit report shall be filed with the Bureau within two weeks from the date such report is received by the institution from the auditor.

Code 1950, § 6-201.37; 1960, c. 402; 1966, c. 584, § 6.1-167; 1972, c. 796, § 6.1-195.44; 1976, c. 658; 1978, c. 14; 1985, c. 425, § 6.1-194.19; 2010, c. 794.

§ 6.2-1127. Bonds of officers and employees.

A. The directors of every savings institution shall require a bond with corporate surety from each of the active officers and employees of the institution as an indemnity for any loss the institution may sustain as a result of such person's fraud, dishonesty, theft, or embezzlement. In lieu of individual bonds a blanket bond with corporate surety covering all active officers and employees of the institution may, with the approval of the board of directors, be obtained. The Commission shall, not less than twice during any period of three consecutive calendar years, examine all such bonds and pass on their sufficiency and either the board of directors or the Commission may require new or additional bonds at any time. The corporate surety shall have a license issued by the Commission.

B. If a savings institution determines that it is unable to obtain the surety bond coverage required by subsection A, it shall immediately notify the Commission. The Commission shall forthwith investigate to determine whether such coverage is available to the institution. If the Commission determines, after such investigation, that such coverage is not reasonably available to the institution, the Commission may, but shall not be required to, close the institution solely because of the unavailability of such coverage under § 6.2-1199. If the institution is not closed because of the unavailability of such coverage, the Commission shall closely monitor the institution to ensure that such coverage is obtained as soon as possible, and shall take such further action under § 6.2-1199 or 6.2-1200 as the Commission deems necessary.

C. The institution, at its cost, may also obtain insurance to protect its directors, officers, and employees against lawsuits arising out of claims of negligence or misconduct.

Code 1950, § 6-201.36; 1960, c. 402; 1966, c. 584, § 6.1-166; 1972, c. 796, § 6.1-195.43; 1979, c. 60; 1985, c. 425, § 6.1-194.20; 1986, c. 628; 2010, c. 794.

§ 6.2-1128. Loans to executive officers or directors.

A. As used in this section, "executive officer" means an officer of a savings institution who participates or has authority to participate in the major policy-making functions of the savings institution.

B. No executive officer or director of any savings institution shall borrow any amount more than $25,000 from the institution until such loan has been approved by (i) a majority of the directors of the institution or (ii) a committee of officers and directors that includes at least one director appointed by the board of directors with authority to approve loans.

C. The following loans or lines of credit shall not be made by an institution unless specifically approved by (i) a majority of the directors of the institution or (ii) a committee of officers and directors that includes at least one director appointed by the board of directors with authority to approve loans:

1. Any loan in an amount of $25,000 or more made to any executive officer or director of an institution or any entity that the Commission determines is controlled by one or more executive officers or directors;

2. Any loan made to the persons or entities described in subdivision 1, the amount of which together with all other obligations, direct or indirect, of such executive officer, director, or controlled entity is $100,000 or more;

3. Any line of credit for $25,000 or more made to the persons or entities described in subdivision 1; or

4. Any line of credit made to the persons or entities described in subdivision 1, the amount of which together with all other obligations, direct or indirect, of such executive officer, director, or controlled entity is $100,000 or more.

If approved by the committee described in clause (ii), the approval shall be specifically reported to the board of directors at its next regular meeting.

D. No extension, renewal, or renegotiation of any loan or line of credit in excess of the amounts described in subsection C shall be made to any of those individuals or entities or their interests unless it is approved by a majority of the board of directors or by the committee of officers and directors appointed by the board. If approved by the committee, such approval shall be specifically reported to the board of directors at its next regular meeting.

E. The prohibitions set forth in subsections C and D shall not be construed to require approval by the board of directors for advances under previously authorized lines of credit.

F. The aggregate amount of a savings institution's loans to its executive officers or directors or their interests shall not be excessive. The Commission may adopt such regulations as may be required to prevent excessive aggregate amounts of lending by savings institutions to those individuals or entities.

1982, c. 103, § 6.1-195.40:1; 1985, c. 425, § 6.1-194.21; 1995, c. 83; 1996, c. 13; 2010, c. 794.

§ 6.2-1129. Overdrafts by savings institution officers, directors or employees.

A. No savings institution shall pay an overdraft of an officer, director, or employee of the institution on any account at the institution unless the payment of funds is made in accordance with (i) a written, preauthorized, interest-bearing extension of credit plan that specifies a method of repayment or (ii) a written, preauthorized transfer of funds from another account of the account holder at the institution.

B. The prohibition set forth in subsection A does not apply to the payment of inadvertent overdrafts on an account in an aggregate amount of $1,000 or less if (i) the account is not overdrawn for more than five business days and (ii) the savings institution charges the officer, director, or employee the same fee charged any other customer of the institution in similar circumstances.

1982, c. 103, § 6.1-195.40:2; 1985, c. 425, § 6.1-194.22; 2010, c. 794.

§ 6.2-1130. Reserves; surplus and undivided profits.

A. Every savings institution doing business in the Commonwealth shall maintain an adequate net worth appropriate for the conduct of its business and the protection of its account holders. Every savings institution (i) shall set up and maintain the reserves required by this chapter and (ii) may set up and maintain such additional reserves as are permitted by this chapter.

B. On or before the closing date of each accounting period, after payment of or provision for all expenses, every savings institution shall transfer to a separate reserve account that shall be set up and maintained for the sole purpose of absorbing losses, referred to in this section as the "general reserve," an amount equal to at least five percent of its net income. A savings institution that at the close of such accounting period has assets in excess of $20 million or that has done business as a savings institution in the Commonwealth for more than 20 years shall transfer to such separate reserve account the greater of five percent of its net income or an amount obtained by subtracting an amount equal to its general reserve at the beginning of the period from an amount equal to four percent of its assets, excluding liquid assets, at the end of the period, until the general reserve is equal to at least five percent of the total amount of its deposit accounts at the beginning of such accounting period. Upon advanced written application of a savings institution, the Commissioner may approve the transfer to the general reserve of a lesser amount for such accounting period. If any credit to the general reserve is made after July 1, 1985, in excess of the minimum requirement, the dollar amount of any such excess may be carried over as a credit toward the minimum requirement of any subsequent period.

C. When the general reserve of a savings institution does not equal at least five percent of the deposit account liability of the institution, credits, as provided in subsection B, shall again be made to the general reserve until it again equals at least five percent of the institution's deposit account liability.

D. In the case of stock savings institutions, the capital stock account, to the extent that the capital has not been impaired, shall be treated as part of the reserve and the board of directors may, by resolution, permanently or conditionally designate all or part of the capital stock, capital surplus, earned surplus, or undivided profit accounts as a part of its general reserve. A savings institution may retain its undivided profits in such amounts as may from time to time be fixed by resolution of its board of directors.

E. The Commission may temporarily reduce the reserve requirements for a savings institution if it finds such reduction to be in the best interest of the institution and its stockholders or members.

F. Notwithstanding the requirements of this section, an insured savings institution may maintain its reserves in accordance with the requirements of the Federal Deposit Insurance Corporation or other federal agency.

Code 1950, § 6-201.28; 1960, c. 402; 1966, c. 584, § 6.1-156; 1968, c. 256; 1972, c. 796, § 6.1-195.33; 1973, c. 133; 1985, c. 425, § 6.1-194.23; 1986, c. 500; 1990, c. 3; 2010, c. 794.

§ 6.2-1131. Liability of members of mutual savings institutions.

A. No member of a mutual savings institution shall be responsible for any losses that the savings account deposits shall not be sufficient to satisfy.

B. No savings account shall be subject to assessment for any unpaid installments on his account.

C. The holder of a savings account shall not be liable for any unpaid installments on his account.

D. No preference between savings account members of a mutual savings institution shall be created with respect to the distribution of assets upon voluntary or involuntary liquidation, dissolution, or winding up of such institution.

1985, c. 425, § 6.1-194.24; 2010, c. 794.

§ 6.2-1132. Mutual capital certificates.

A. A mutual savings institution shall have the power to issue and to sell, directly or through underwriters, capital certificates that (i) represent nonwithdrawable capital contributions and (ii) constitute part of the reserves and net worth of the institution.

B. Capital certificates:

1. Shall have no voting rights;

2. Shall be subordinate to all savings accounts, debt obligations and claims of creditors of the institution;

3. Shall constitute a claim in liquidation against any reserves, surplus, and other net worth accounts remaining after the payment in full of all savings accounts, debt obligations, and claims of creditors;

4. Shall be entitled to the payment of earnings prior to the allocation of any income to surplus or other net worth accounts of the institution; and

5. May be issued with a fixed rate of earnings or with a prior claim to distribution of a specified percentage of any net income remaining after required allocations to reserves, or a combination thereof.

C. Losses shall be charged against capital certificates only after reserves, surplus, and other net worth accounts have been exhausted.

1985, c. 425, § 6.1-194.25; 2010, c. 794.

Article 3 - OFFICES, BRANCHES, AND FACILITIES

§ 6.2-1133. Offices and other facilities of state and foreign savings institutions; approval of branch offices required.

A. A state savings institution may establish and operate such offices and other facilities as are authorized by its board of directors. A state savings institution shall not establish a branch office or other office or facility where deposits are accepted without obtaining the prior approval of the Commission as provided in subsection B. Prior to establishing or permanently closing any office or other facility, a state association shall give at least 30 days' written notice to the Commissioner, in such form as may be prescribed by the Commissioner. Prior to establishing, relocating, or permanently closing any office or other facility of the savings bank or any of its affiliates, a savings bank shall give at least 30 days' written notice to the Commissioner, in such form as may be prescribed by the Commissioner. A savings institution shall also give written notice to the Commission, in such form as may be prescribed by the Commission, within 10 days after it has established or permanently closed an office or other facility, and if the institution is a savings bank, it shall give such written notice to the Commission within 10 days after it has relocated any such office or other facility.

B. Applications for authorization to establish a branch office or other office or facility where deposits are accepted shall be made in writing, in such form as may be prescribed by the Commission. Upon review of a savings institution's application and any other information that the Commission may reasonably require, the Commission shall approve the establishment of such office or facility if it is satisfied that the public interest will be served thereby and, if the applicant is a savings bank, that it has sufficient capital to warrant additional expansion. Such offices or facilities may be closed without the prior approval of the Commission. However, written notice of the closing of such an office shall be given to the Commissioner as provided in subsection A.

C. The requirements of subsections A and B shall also apply to the establishment and closing of the offices of a foreign savings institution authorized to transact business in the Commonwealth.

Code 1950, § 6-201.41; 1960, c. 402; 1966, c. 584, § 6.1-171; 1970, c. 397; 1972, c. 796, § 6.1-195.48; 1976, c. 658; 1978, c. 683; 1985, c. 425, § 6.1-194.26; 1991, c. 230, § 6.1-194.119; 2010, c. 794.

§ 6.2-1134. Facilities associated with branch office.

A state or foreign savings institution authorized to transact business in the Commonwealth may establish without prior approval of the Commission a drive-in or pedestrian office opened in conjunction with an approved branch office of the institution, if such drive-in or pedestrian office is to be located (i) within 500 feet of a public entrance of the approved branch office and (ii) closer to that entrance than to a public entrance of any other financial institution. The functions of a drive-in or pedestrian office shall be limited to the ordinary functions performed at a teller window.

1985, c. 425, § 6.1-194.27; 1991, c. 230, § 6.1-194.120; 2010, c. 794.

§ 6.2-1135. Change of branch office location.

A. A state savings institution shall not change the permanent location of a branch office without the prior approval of the Commission. An application to change the location of a branch office shall be made in writing in such form as may be prescribed by the Commission. Such application shall be approved by the Commission if the Commission finds that the change in location is in the public interest.

B. Notwithstanding the provisions of subsection A, a state savings institution may change the permanent location of a branch office, without applying for the approval of the Commission, if the new location will be within a one mile radius of the old location of such branch office. In such event, the state savings institution shall notify the Commissioner in writing, in such form as may be prescribed by the Commissioner, at least 60 days before such office relocation and may proceed with the relocation unless, within 30 days of receipt of the notice, the Commissioner notifies the institution that the relocation is not in the public interest. In that event, the institution shall be required to file an application and obtain the approval of the Commission in accordance with subsection A. The institution shall also notify the Commissioner in writing that the office relocation has been completed within 10 days after the opening of the office at its new location.

C. The provisions of subsections A and B shall also apply to foreign savings institutions authorized to transact business in the Commonwealth.

D. The provisions of this section shall also apply to the relocation of the main office of a state savings institution if it intends to accept deposits at the new location of the main office.

1985, c. 425, § 6.1-194.28; 1991, c. 230, § 6.1-194.121; 2010, c. 794.

§ 6.2-1136. Remote service units.

A. As used in this section:

"Personal security identifier" or "PSI" or "PIN" means any word, number, or other security identifier essential for an account holder to gain access to an account through a remote service unit.

"Remote service unit" or "RSU" means an information processing device, including associated equipment, structures and systems, by which information relating to financial services rendered to the public is stored and transmitted, instantaneously or otherwise, to a financial institution. Any such device not on the premises of a state savings institution that, for activation and account access, requires use of a machine-readable instrument and personal security identifier in the possession and control of an account holder, is an RSU. The term includes, without limitation, point-of-sale terminals, merchant-operated terminals, cash-dispensing machines, and automated teller machines. The term does not include automated teller machines on the premises of a state savings institution, unless shared with other financial institutions.

B. Subject to the requirements of the federal Electronic Fund Transfers Act (15 U.S.C. § 1693 et seq.) and Regulation E of the Consumer Financial Protection Bureau, a state savings institution may establish or use remote service units and participate with others in remote service unit operations on an unrestricted geographic basis. A state savings institution may establish a remote service unit without prior approval of the Commission, provided that notice is given to the Commissioner in accordance with the provisions of subsection A of § 6.2-1133. No remote service unit may be used to open a savings account or a demand account or to establish a loan account.

C. Before permitting an account holder to use a remote service unit, the savings institution shall provide a personal security identifier to the account holder and require its use when accessing a remote service unit. An institution may not employ RSU access techniques that require the account holder to disclose a PSI to another person.

D. A state savings institution shall not share an RSU with any financial institution or other entity the accounts of which are not insured by an agency of the federal government or by some other insuring agency approved by the Commissioner.

E. A state savings institution shall not share an RSU located in the Commonwealth with any foreign savings institution, or other financial institution that is not incorporated under the laws of the Commonwealth, unless the foreign savings institution or other financial institution has been authorized by the Commission to conduct its business in the Commonwealth. Nothing herein shall be deemed to prohibit a state savings institution from sharing an RSU with a federal savings institution or other federally chartered financial institution authorized to conduct its business in the Commonwealth.

F. An RSU shall not be considered to be a branch office of a state savings institution.

1985, c. 425, § 6.1-194.29; 1991, c. 230, § 6.1-194.122; 2010, c. 794; 2016, c. 501.

§ 6.2-1137. Off premises financial services.

A. As used in this section, "off premises financial services" means the transfer of funds or financial information or the performance of other transactions initiated by the customer by means of an electronic terminal, such as a telephone, a computer terminal, or a television set that is linked to a state savings institution's electronic network by telephone or cable television lines or other electronic means.

B. A state savings institution may utilize any electronic technology to provide its customers with off premises financial services. Any such services provided under this section are subject to the federal Electronic Fund Transfers Act (15 U.S.C. § 1693 et seq.) and Regulation E of the Consumer Financial Protection Bureau.

1985, c. 425, § 6.1-194.30; 1991, c. 230, § 6.1-194.123; 2010, c. 794; 2016, c. 501.

§ 6.2-1138. Suspension of business during actual or threatened emergency.

In the event of an actual or threatened enemy attack or civil insurrection or fire, flood, hurricane, earthquake, or other similar natural disaster, affecting the community in which a savings institution is doing business, the offices of the savings institution thereby affected may be temporarily closed by appropriate officers of the savings institution without prior approval of the board of directors or the Commissioner.

1985, c. 425, § 6.1-194.31; 2010, c. 794.

Article 4 - CONVERSIONS, REORGANIZATIONS, MERGERS, AND ACQUISITIONS

§ 6.2-1139. Conversion from mutual savings institution to stock institution.

A. With the approval of the Commission, and in accordance with provisions of this section and regulations adopted hereunder, a state mutual savings institution may convert to a stock institution. The conversion shall be conducted in a manner equitable to all parties thereto as follows:

1. The board of directors of the mutual savings institution shall first adopt by two-thirds vote a conversion plan. The provisions of the plan shall comply with regulations adopted by the Commission;

2. The plan shall provide that holders of savings accounts in the mutual savings institution will be afforded the opportunity to preserve their interest in the institution's net worth by subscribing to stock; and

3. The Commission shall approve any such plan of conversion if the Commission ascertains that such conversion will not have an adverse effect on the stability of the institution and that all other regulations of the Commission relating to the conversion of a mutual savings institution to a stock institution have been complied with.

B. The Commission shall adopt regulations governing the procedures to be followed in completing the conversion after a satisfactory plan has been adopted. The regulations shall ensure that any institution in converting shall continue to have its accounts insured by the Federal Deposit Insurance Corporation or other federal insurance agency.

1972, c. 796, § 6.1-195.57; 1975, c. 130; 1978, c. 683; 1985, c. 425, § 6.1-194.32; 1990, c. 3; 1994, c. 331, § 6.1-194.123:1; 2010, c. 794.

§ 6.2-1140. Reorganization of mutual association into mutual holding company; approval by Commissioner; powers; issuance of stock.

A. Notwithstanding any other provision of law, with the approval of the Commission, and in accordance with the provisions of this section and any regulations adopted pursuant to this section, any mutual association may reorganize to become a mutual holding company by:

1. Causing a stock association to be formed by incorporating a stock corporation and obtaining a certificate of authority to begin business as a savings institution pursuant to the provisions of Chapter 9 (§ 13.1-601 et seq.) of Title 13.1 and Article 2 (§ 6.2-1114 et seq.) of this chapter;

2. Transferring the substantial part of its assets and liabilities, including all of its deposit liabilities, to the stock association created, in exchange for receipt of no less than 51 percent of the capital stock of the stock association; and

3. Adopting an amended charter changing its name and conforming its organization, governance, and powers to those prescribed hereunder for a mutual holding company.

B. In connection with the transfer of assets and liabilities, the resulting mutual holding company may retain assets to the extent such assets are not required to be transferred to the stock association created in order to satisfy any capital or reserve requirements imposed by applicable state or federal law.

C. Upon such transfer, all persons who prior thereto held depository rights with respect to or other rights as creditors of the reorganized mutual association shall have such rights solely with respect to the stock association created, and the corresponding liability or obligation of the reorganized mutual association to such persons shall be assumed by the stock association. Persons who prior thereto had any ownership, liquidation, or voting rights with respect to the reorganized mutual association, in their capacities as savings depositors, and pursuant to provision of law, or pursuant to the articles of incorporation and bylaws of that association, shall continue to have such rights but solely with respect to the mutual association in its reorganized form as a mutual holding company. The ownership or liquidation interest of any savings depositor of the subsidiary stock association in the net earnings and net worth of the resulting mutual holding company, and the voting rights of any such depositor in the mutual holding company, shall terminate, or otherwise be limited, in the same manner and on the happening of the same events as was the case prior thereto with the interest held by that depositor in the mutual association.

D. The reorganization of a mutual association into a mutual holding company shall be conducted in a manner that is equitable to all parties. The board of directors of the mutual association shall first adopt by a two-thirds vote a plan of reorganization, the provisions of which shall comply with requirements set forth in regulations adopted by the Commission. Such plan shall provide that holders of savings deposits in the reorganized mutual association shall be afforded an opportunity to preserve their interests by subscribing to the minority stock of the subsidiary stock association. The Commission shall approve any such plan of reorganization if the Commission ascertains that the reorganization shall not have an adverse effect on the stability of the association and that the reorganized mutual association has complied with all laws and regulations of the Commission relating to the reorganization of a mutual association into a mutual holding company. The Commission shall adopt regulations governing the procedures to be followed in completing the reorganization after the Commission has approved a plan of reorganization. Such regulations shall ensure that the subsidiary association resulting from such reorganization shall continue to have its accounts insured by the Federal Deposit Insurance Corporation or other federal insurance agency.

E. Upon reorganization, the resulting mutual holding company (i) shall continue to possess and may exercise all the rights, powers, and privileges, except deposit-taking powers, of a mutual association under the laws of the Commonwealth and (ii) shall be subject to the limitations and restrictions imposed on savings institution holding companies by §§ 6.2-1147 and 6.2-1192, as well as all limitations and restrictions applicable to mutual savings institutions.

F. Upon reorganization, the association chartered as a stock corporation shall have the power to issue to persons other than the mutual holding company of which it is a subsidiary, an amount of common stock which in the aggregate does not exceed 49 percent of the issued and outstanding common stock of the association. For purposes of this percentage limitation, any issued and outstanding securities that are convertible into common stock shall be considered as issued and outstanding common stock. If at any time, the mutual holding company resulting from reorganization sells or otherwise disposes of outstanding shares in its stock association subsidiary, and as a result such mutual holding company no longer owns more than 51 percent of the outstanding shares of such association, or if the subsidiary stock association sells substantially all of its assets in a transaction in which substantially all deposit liabilities of such association are assumed and become liabilities of the purchaser of those assets, the Commission, on application of the Commissioner, may, after reasonable notice to the mutual holding company and its subsidiary stock association, appoint a receiver to wind up the affairs of the mutual holding company.

G. Any mutual holding company having its principal place of business in the Commonwealth may convert into a stock savings institution holding company, with the approval of the Commissioner, and in accordance with any regulations adopted by the Commission.

1989, c. 205, § 6.1-194.32:1; 1990, c. 3; 2010, c. 794.

§ 6.2-1141. Conversion of state savings institution into federal financial institution.

A. A state savings institution may convert into a federal financial institution as follows:

1. At any meeting of the members or stockholders called and held in accordance with the Virginia Stock Corporation Act (§ 13.1-601 et seq.) or the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) to consider such action, the members or stockholders, by an affirmative vote of those holding and voting two-thirds of the votes present in person or by proxy, may resolve to convert the state savings institution into a federal financial institution;

2. A copy of the minutes of the meeting duly certified by the president or vice-president and the secretary or assistant secretary of the state savings institution shall be transmitted to the Commission;

3. Thereafter, the state savings institution shall take such action as is necessary under federal law to make it a federal financial institution; and

4. The savings institution shall file with the Commission a certified copy of the charter issued to it by the federal chartering authority or a certificate of that authority showing the organization of the state savings institution as a federal financial institution.

B. Upon the filing of the certified copy of a charter or certificate of authority as provided in subdivision A 4, the savings institution shall cease to be a state savings institution.

C. No state savings institution shall convert into a federal financial institution until it has been in operation as a state savings institution for a period of at least five years.

D. When a conversion of a state savings institution into federal financial institution becomes effective, the state savings institution shall cease to be a Virginia corporation and all its property, by operation of law and without any further act or deed, shall continue to be vested in it under its new name as a federal financial institution and under its federal charter. The federal financial institution shall have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by it as a state savings institution. The federal financial institution, at the time of the taking effect of the conversion, shall become, and continue to be, responsible for all of the obligations of the state savings institution, including taxes and other liabilities created by law or incurred by it before becoming a federal financial institution, to the same extent as though the conversion had not taken place.

Code 1950, §§ 6-201.43, 6-201.44; 1960, c. 402; 1966, c. 584, §§ 6.1-173, 6.1-174; 1972, c. 796, §§ 6.1-195.52, 6.1-195.53; 1982, c. 156; 1985, c. 425, §§ 6.1-194.33, 6.1-194.34; 1990, c. 3; 1991, c. 230, §§ 6.1-194.124, 6.1-194.125; 1995, c. 133; 2010, c. 794.

§ 6.2-1142. Conversion of federal financial institution into state savings institution or state bank.

A. A federal financial institution doing business in the Commonwealth may become a state savings institution, and such a federal financial institution that is a stock institution may become a state bank, as follows:

1. In either case, the federal financial institution shall take such action as will under federal law and regulations terminate its existence as a federal financial institution on a specified date;

2. In the case of a conversion to a state savings institution, the directors of the federal financial institution shall organize a corporation under this chapter and, if a stock institution, the Virginia Stock Corporation Act (§ 13.1-601 et seq.), or if a mutual savings institution, the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.), and the new corporation shall apply for a certificate of authority to do business under § 6.2-1118; and

3. In the case of a conversion to a state bank, the directors of the federal financial institution shall organize a corporation under Chapter 8 (§ 6.2-800 et seq.) and the Virginia Stock Corporation Act (§ 13.1-601 et seq.), and the new corporation shall apply for a certificate of authority to do business under § 6.2-816. If the applicant meets the standards established by § 6.2-816, the Commission may issue it a certificate of authority to begin a banking business. The order shall designate the main office of the federal financial institution as the main office of the resulting bank, and the resulting bank shall be permitted to operate all branch offices of the former federal financial institution. Within one year of the date of such a conversion, the resulting bank shall conform its assets and operations to the provisions of law regulating the operation of banks. The Commission may grant such resulting bank additional one-year periods, not to exceed a total of four additional years, in which to conform its assets and operations to the provisions of law regulating the operation of banks.

B. The former federal financial institution converting to a state savings institution or a state bank shall transact no business as a state savings institution or as a state bank other than that relating to its organization until its certificate of authority to do business has been granted and its dissolution as a federal financial institution has become effective.

C. As soon as the certificate of authority to do business has been granted and its dissolution as a federal financial institution has become effective, all the property of the federal financial institution shall by operation of law and without any further act or deed be vested in and become the property of the state savings institution or state bank. The state savings institution or state bank shall (i) have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held or enjoyed by the federal financial institution and (ii) become, and continue to be, responsible for all the obligations, duties and agreements of the federal financial institution, including taxes and other liabilities created by law or incurred by it before becoming a state savings institution or state bank to the same extent as though the conversion had not taken place.

D. Upon conversion of a federal financial institution to a state savings bank, the state savings bank shall have the right to continue to operate all branch offices then in existence without having to obtain the approval of the Commission pursuant to § 6.2-1133.

Code 1950, §§ 6-201.45, 6-201.46, 6-201.47; 1960, c. 402; 1966, c. 584, §§ 6.1-175, 6.1-176, 6.1-177; 1972, c. 796, §§ 6.1-195.54, 6.1-195.55, 6.1-195.56; 1975, c. 129; 1985, c. 425, §§ 6.1-194.35, 6.1-194.36, 6.1-194.37; 1991, c. 230, §§ 6.1-194.126, 6.1-194.127, 6.1-194.128; 1995, c. 133; 2010, c. 794.

§ 6.2-1143. Conversion from state savings bank to state association; conversion from state association to state savings bank.

A. A state savings bank may be converted into a state association by the amendment of its articles of incorporation in compliance with the procedure established by Title 13.1, provided that such conversion is approved in advance by the Commission. Prior to approving or disapproving a conversion, the Commission shall investigate the application to convert as if it were an application for a certificate of authority to begin a savings and loan association business, and approval shall not be granted unless the applicant meets the standards established by § 6.2-1118. The order granting a certificate of authority to do a savings and loan business shall designate the main office of the state savings bank as the main office of the resulting financial institution. The resulting financial institution shall be permitted to operate all branch offices of the state savings bank that could have been established de novo by such financial institution having its main office at such location or which were in operation for at least five years prior to the date of the order permitting conversion. Within one year of the date of a conversion, the resulting financial institution shall conform its assets and operations to the provisions of law regulating the operation of state associations. The Commission may grant such resulting financial institution additional one-year periods, not to exceed a total of four additional years, in which to conform its assets and operations as required by this section.

B. A state association may be converted into a state savings bank by the amendment of its articles of incorporation in compliance with the procedure established by Title 13.1, provided that such conversion is approved in advance by the Commission. Prior to approving or disapproving a conversion, the Commission shall investigate the application to convert as if it were an application for a certificate of authority to begin a savings bank, and approval shall not be granted unless the applicant meets the standards established by § 6.2-1118. Within one year of the date of the conversion, the resulting state savings bank shall conform its assets and operations to the provisions of law regulating the operation of state savings banks. The Commission may grant such resulting state savings bank additional one-year periods, not to exceed a total of four additional years, in which to conform its assets and operations to the provisions of law regulating the operation of state savings banks.

1991, c. 230, § 6.1-194.129; 2010, c. 794.

§ 6.2-1144. Conversion from stock savings institution to bank.

A. A state stock association or state savings bank may be converted into a bank by the amendment of its articles of incorporation in compliance with the procedure established by Title 13.1, provided that such conversion is approved in advance by the Commission. Prior to approving or disapproving a conversion, the Commission shall investigate the application to convert as if it were an application for a certificate of authority to begin a banking business, and approval shall not be granted unless the applicant meets the standards established by § 6.2-816. The order granting a certificate of authority to do a banking business shall designate the main office of the savings institution as the main office of the resulting bank, and the resulting bank shall be permitted to operate all branch offices of the savings institution that could have been established de novo by a bank having its main office at such location or which were in operation for at least five years prior to the date of the order permitting conversion. Within one year of the date of a conversion, the resulting bank shall conform its assets and operations to the provisions of law regulating the operation of banks. The Commission may grant such resulting bank additional one-year periods, not to exceed a total of four additional years, in which to conform its assets and operations to the provisions of laws regulating the operation of banks.

B. A bank may be converted into a savings bank upon compliance with the procedure set forth in § 6.2-829, or into a stock association upon compliance with the procedure set forth in § 6.2-830.

1982, c. 224, § 6.1-195.57:2; 1985, c. 425, § 6.1-194.38; 1991, c. 230, § 6.1-194.129; 2010, c. 794.

§ 6.2-1145. Merger or consolidation of savings institutions.

A. Two or more mutual savings institutions or two or more stock institutions may merge, subject to the approval of the Commission, when the Commission finds that the merger will be in the public interest and in accordance with applicable laws and regulations.

B. Two or more state savings banks may consolidate or merge, subject to the approval of the Commission, when the Commission finds that the capital of the resulting institution will be sufficient to warrant successful operation, and that the merger or consolidation will be in the public interest and in accordance with applicable laws and regulations.

C. The order approving the merger shall specify which office is to be the main office and which office or offices may be operated as branch offices.

Code 1950, § 6-201.42; 1960, c. 402; 1966, c. 584, § 6.1-172; 1972, c. 796, § 6.1-195.51; 1982, c. 211; 1985, c. 425, § 6.1-194.39; 1988, c. 3; 1991, c. 230, § 6.1-194.130; 2010, c. 794.

§ 6.2-1146. State association or association holding company acquiring bank; association acquired by bank or bank holding company; merger or consolidation of association and bank.

A. Notwithstanding the provisions of § 6.2-874, 6.2-885, or 6.2-886, and subject to the prior approval of the Commission:

1. A state association or a federal savings institution may become a subsidiary of (i) a state bank or a national bank whose main office is located within the Commonwealth or (ii) a bank holding company whose banking subsidiaries principally conduct their operations within the Commonwealth;

2. A state bank may become a subsidiary of (i) a state association or a federal savings institution whose main office is located within the Commonwealth or (ii) a savings and loan holding company whose principal place of business is located within the Commonwealth;

3. A state association or a federal savings institution may merge into or consolidate with a state bank or a national bank whose main office is located within the Commonwealth or a state bank or a national bank may merge into or consolidate with a state association or a federal savings institution whose main office is located within the Commonwealth;

4. A state savings bank may become a subsidiary of (i) a state association, state bank, federal savings institution or national bank the main office of which is located within the Commonwealth or (ii) a financial institution holding company whose subsidiaries principally conduct their operations within the Commonwealth;

5. A state bank or state association may become a subsidiary of a state savings bank;

6. A state savings bank may merge into or consolidate with a state association, state bank, federal savings institution or national bank whose main office is located within the Commonwealth; and

7. A state association, state bank or federal financial institution may merge into or consolidate with a state savings bank.

B. If the resulting entity is to do business as a bank, the Commission shall not approve the merger or consolidation unless the applicant meets the standards established by § 6.2-816. If the resulting entity is to do business as a savings institution, the Commission shall not approve the merger or consolidation unless the applicant meets the standards established by § 6.2-1118. In either case, the order granting a certificate of authority to do business shall designate the main office of the resulting entity.

C. The resulting entity shall be permitted to operate all branch offices of the merging or consolidating entities that could have been established de novo by the resulting entity or that were in operation at least five years prior to the date of the order permitting merger or consolidation. Within one year of such merger or consolidation, the resulting entity shall conform its assets and operations to the provisions of law regulating the operation of savings institutions if the resulting entity is operated as a savings institution or to the provisions of law regulating the operation of banks if the resulting entity is operated as a bank. The Commission may grant the resulting entity additional one-year periods, not to exceed a total of four additional years, in which to conform its assets and operations as provided herein.

1982, c. 224, § 6.1-195.57:1; 1985, c. 425, § 6.1-194.40; 1991, cc. 228, 230, § 6.1-194.131; 1996, c. 26; 2010, c. 794.

§ 6.2-1147. Acquisition of control of state stock institution requires Commission approval.

No person, whether acting alone or in concert with others, shall acquire ownership or control of 25 percent or more of the voting shares of a state stock savings institution, or otherwise control the election of a majority of the directors of such institution, without the approval of the Commission. The Commission shall not approve the proposed acquisition unless the Commission determines that the proposed acquisition is in the public interest.

1985, c. 425, § 6.1-194.87; 1990, c. 3; 1991, c. 230, § 6.1-194.152; 1996, c. 16; 2010, c. 794.

Article 5 - FOREIGN SAVINGS INSTITUTIONS; ACQUISITIONS BY OUT-OF-STATE SAVINGS INSTITUTIONS OR OUT-OF-STATE SAVINGS INSTITUTION HOLDING COMPANIES

§ 6.2-1148. Definitions.

As used in this article, unless the context requires a different meaning:

"Acquire" means:

1. The merger or consolidation of one stock savings institution with another stock savings institution or of a savings institution holding company with another savings institution holding company;

2. The acquisition by a savings institution holding company or savings institution of direct or indirect ownership or control of voting shares of another savings institution holding company or a savings institution, if, after such acquisition, the savings institution holding company or savings institution making the acquisition will directly or indirectly own or control more than 25 percent of any class of voting shares of the other savings institution holding company or savings institution;

3. The direct or indirect acquisition by a savings institution holding company or by a savings institution of all or substantially all of the assets of another savings institution holding company or of another savings institution; or

4. Any other action that would result in direct or indirect control by a savings institution holding company or by a savings institution of another savings institution holding company or another savings institution.

"Out-of-state savings institution" means a savings institution that:

1. Is organized under the laws of the United States or of one of the states other than Virginia; and

2. Has its principal place of business in a state other than Virginia.

"Out-of-state savings institution holding company" means a savings institution holding company that has its principal place of business in a state other than Virginia.

"Principal place of business of a savings institution" shall be the state in which the largest portion of the deposits of the savings institution is located at the end of the last calendar year.

"Principal place of business of a savings institution holding company" shall be the state in which the largest portion of the deposits of the holding company's subsidiaries is located as of the end of the last calendar year.

"Subsidiary" with respect to a savings institution holding company means:

1. Any company 25 percent or more of the voting shares of which, excluding shares owned by the United States or by any company wholly owned by the United States, is directly or indirectly owned or controlled by such savings institution holding company, or is held by it with power to vote;

2. Any company the election of a majority of the directors of which is controlled in any manner by such savings institution holding company; or

3. Any company with respect to the management or policies of which such savings institution holding company has the power, directly or indirectly, to exercise a controlling influence, as determined by the Commission, after notice and opportunity for hearing.

"Virginia savings institution" means a savings institution, including a state savings bank, that:

1. Is organized under the laws of the Commonwealth or of the United States; and

2. Has deposit-taking offices located only in the Commonwealth.

"Virginia savings institution holding company" means a savings institution holding company, including the holding company of a state savings bank, that:

1. Has its principal place of business in the Commonwealth;

2. The financial institution subsidiaries of which are located outside the Commonwealth hold not greater than 20 percent of the total deposits held by all of its financial institution subsidiaries; and

3. Is not controlled by a savings institution holding company other than a Virginia savings institution holding company.

1985, c. 425, § 6.1-194.96; 1988, c. 535; 1994, cc. 315, 353; 2010, c. 794.

§ 6.2-1149. Foreign savings institutions; certificate of authority.

A. A foreign savings institution shall not transact a savings institution business in the Commonwealth unless it first receives from the Commission a certificate of authority to do so.

B. A foreign savings institution may apply to the Commission for a certificate of authority by paying the filing fee prescribed by the Commission and filing an application that shall include:

1. A copy of its articles of incorporation and bylaws, certified as a true copy by the public officer having custody of the original articles and bylaws;

2. Evidence satisfactory to the Commission that its accounts are insured by the Federal Deposit Insurance Corporation or other federal insurance agency satisfactory to the Commissioner; and

3. Such other information as the Commission may require.

C. The Commission shall issue a certificate of authority to the foreign savings institution when:

1. The Commissioner has examined the application of the institution and investigated and determined that the institution meets the requirements of § 6.2-1118;

2. The Commissioner has verified the financial status of the institution by conducting such examination of its assets and its records as the Commission shall deem appropriate for the purpose of ascertaining whether they meet the requirements of this chapter with regard to state associations;

3. The Commissioner is satisfied that the institution is in sound financial condition, and that it is conducting its business, and will conduct its business in the Commonwealth, in a manner consistent with the laws of the Commonwealth; and

4. The Commissioner is satisfied that the laws, regulations or administrative actions of the state or territory where the principal office of the applicant is located do not prohibit or unfairly impede a state association or state savings bank from transacting business in such state or territory.

D. In meeting the requirements set out in subdivisions C 1, C 2, and C 3, the Commissioner may rely on examinations, audits and other information provided by the federal and state supervisory authorities charged with the responsibility of regulating and supervising savings institutions in the state where the applicant's principal place of business is located. Prior to issuing a certificate of authority to the foreign savings institution, the Commission shall enter into cooperative agreements with the appropriate regulatory authorities for the periodic examination of the foreign savings institution. The Commission may accept reports of examination and other records from such authorities in lieu of conducting its own examinations.

1985, c. 425, § 6.1-194.41; 1986, cc. 500, 509; 1987, c. 289; 1990, c. 3; 1994, c. 353; 2010, c. 794.

§ 6.2-1150. When operation of foreign savings institution in the Commonwealth is prohibited.

When the laws, regulations or administrative actions of another state prohibit or unfairly impede a state savings institution from transacting business in that state, then the savings institutions of that state are prohibited from transacting business in the Commonwealth.

1985, c. 425, § 6.1-194.42; 1994, c. 353; 2010, c. 794.

§ 6.2-1151. Applicability of Virginia Stock and Nonstock Corporation Acts.

Except as otherwise provided in this chapter, a foreign savings institution conducting a savings institution business in the Commonwealth shall comply with the provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.) and the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) governing the admission and transaction of business by foreign corporations in the Commonwealth.

1985, c. 425, § 6.1-194.43; 2010, c. 794.

§ 6.2-1152. Law applicable to contracts of foreign savings institutions.

Any contract made by a foreign savings institution with a resident of the Commonwealth or a foreign corporation authorized to do business in the Commonwealth shall be construed according to the laws of the Commonwealth.

1985, c. 425, § 6.1-194.44; 2010, c. 794.

§ 6.2-1153. Examination and supervision of foreign savings institutions.

A. Each foreign savings institution authorized to transact business in the Commonwealth shall furnish to the Commissioner a copy of all periodic reports of examinations of the institution conducted by all supervisory agencies that examine the institution to determine its financial soundness. Such reports shall include the examination reports of the Federal Deposit Insurance Corporation or other federal examining agency. Such report copies shall be furnished to the Commissioner within 10 days after the institution receives the report and shall be in certified form or such other form as is acceptable to the Commissioner. In determining whether such institution is in sound financial condition, the Commissioner shall be entitled to rely solely on such examination reports.

B. The Commission shall enter into cooperative agreements with other supervisory authorities for purposes of determining the financial soundness of the foreign savings institutions doing business in the Commonwealth. The Commission may enter into joint actions with other supervisory authorities having concurrent jurisdiction over foreign savings institutions doing business in the Commonwealth or may take such actions independently to carry out its responsibilities under this chapter and assure compliance with the provisions of this chapter and other applicable financial institution laws of the Commonwealth.

1985, c. 425, § 6.1-194.45; 1990, c. 3; 2010, c. 794.

§ 6.2-1154. Revocation of certificate of authority of foreign savings institution.

A. The Commission may revoke a certificate of authority of a foreign savings institution if:

1. The institution fails to conduct its business in the Commonwealth in a manner consistent with the laws of the Commonwealth;

2. The affairs of the institution are in an unsafe condition;

3. The institution refuses to comply with the orders of the Commission or refuses to comply with a request by the Commissioner to review the books and records of the institution; or

4. The institution fails to pay any fees or taxes imposed by the laws of the Commonwealth.

B. The Commission may also revoke the certificate of authority of a foreign savings institution at any time that the Commission determines that the state where the principal place of business of the foreign savings institution is located has enacted or amended its laws or regulations, or taken administrative action, so as to prohibit or unfairly impede a state association or state savings bank from transacting business in that state.

1985, c. 425, § 6.1-194.46; 1994, c. 353; 2010, c. 794.

§ 6.2-1155. Unapproved foreign savings institutions.

The Commissioner is authorized to obtain an injunction or to take any other action necessary to prevent any foreign savings institution from doing any business of a savings institution in the Commonwealth without appropriate approval.

1985, c. 425, § 6.1-194.47; 2010, c. 794.

§ 6.2-1156. Activities that are not considered "doing business.".

For the purposes of this chapter and any other law of the Commonwealth prohibiting, limiting, regulating, charging or taxing the doing of business in the Commonwealth by foreign savings institutions or foreign corporations of any type, any federal savings institution the principal place of business of which is located outside the Commonwealth, and any foreign savings institution that is subject to state or federal supervision, or both, that by law is subject to periodic examination by such supervisory authority and to a requirement of periodic audit, shall not be considered to be doing business or to have a tax situs or nexus in or with the Commonwealth by reason of engaging in any of the following activities:

1. The purchase, acquisition, inspection, appraisement, holding, sale, assignment, transfer, collecting, and enforcement of obligations or any interest therein secured by real estate mortgages, deeds of trust, or other similar instruments, covering real property located in the Commonwealth, or the foreclosure of such instruments, or the acquisition of title to such property by foreclosure, or otherwise, as a result of default under such instruments, or the holding, protection, rental, maintenance and operation of said property so acquired, or the disposition thereof; or

2. The advertising or solicitation of deposit accounts, or the making of any representations with respect thereto in the Commonwealth through the media of the mail, radio, television, magazines, newspapers, or any other media that are published or circulated within the Commonwealth, if (i) such advertising, solicitation or the making of such representations is accurately descriptive of fact and (ii) no such advertising, solicitation, or the making of such representations contains any reference to insurance or guarantee of accounts, unless the accounts of such institution are insured by the Federal Deposit Insurance Corporation or other insurer approved by the Commissioner.

1985, c. 425, § 6.1-194.48; 1990, c. 3; 2010, c. 794.

§ 6.2-1157. Acquisitions by out-of-state savings institution holding company.

A. Any savings institution holding company that does not have a Virginia savings institution subsidiary, except as acquired in the regular course of securing or collecting a debt previously contracted in good faith, may acquire a Virginia savings institution holding company or a Virginia savings institution with the approval of the Commission. Such savings institution holding company shall submit to the Commission an application for approval of such acquisition, which application may be approved if the Commission:

1. Determines that the laws of the state in which the savings institution holding company making the acquisition has its principal place of business do not prohibit or unfairly impede a Virginia savings institution holding company meeting the criteria in this article from acquiring savings institutions or savings institution holding companies in that state;

2. Determines that the laws of the state in which the savings institution holding company making the acquisition has its principal place of business permit such savings institution holding company to be acquired by the Virginia savings institution holding company or Virginia savings institution sought to be acquired. For purposes of this subsection, a Virginia savings institution shall be treated as if it were a Virginia savings institution holding company;

3. Determines either that the Virginia savings institution sought to be acquired has been in existence and continuously operating for more than two years or that all of the savings institution subsidiaries of the Virginia savings institution holding company sought to be acquired have been in existence and continuously operating for more than two years. The Commission may approve the acquisition by such savings institution holding company of all or substantially all of the shares of a savings institution organized solely for the purpose of facilitating the acquisition of a savings institution that has been in existence and continuously operating as a savings institution for more than two years; and

4. Makes the acquisition subject to any conditions, restrictions, requirements or other limitations that would apply to the acquisition by a Virginia savings institution holding company of a savings institution or savings institution holding company in the state where such savings institution holding company making the acquisition has its principal place of business but that would not apply to the acquisition of a savings institution or savings institution holding company in such state by a savings institution holding company all the savings institution subsidiaries of which are located in that state.

B. An out-of-state savings institution holding company that has a Virginia savings institution subsidiary, except as acquired in the regular course of securing or collecting a debt previously contracted in good faith, may acquire any Virginia savings institution or Virginia savings institution holding company with the approval of the Commission. Such savings institution holding company shall submit to the Commission an application for approval of such acquisition, which application may be approved if the Commission:

1. Determines either that the Virginia savings institution sought to be acquired has been in existence and continuously operating for more than two years or that all of the savings institution subsidiaries of the Virginia savings institution holding company sought to be acquired have been in existence and continuously operating for more than two years. The Commission may approve the acquisition by such savings institution holding company of all or substantially all of the shares of the savings institution organized solely for the purpose of facilitating the acquisition of a savings institution that has been in existence and continuously operating as a savings institution for more than two years; and

2. Makes the acquisition subject to any conditions, restrictions, requirements or other limitations that would apply to the acquisition by a Virginia savings institution holding company of a savings institution or a savings institution holding company in the state where such savings institution holding company making the acquisition has its principal place of business but that would not apply to the acquisition of a savings institution or a savings institution holding company in such state by a savings institution holding company all the savings institution subsidiaries of which are located in that state.

1985, c. 425, § 6.1-194.97; 1994, c. 353; 2010, c. 794.

§ 6.2-1158. Acquisitions by out-of-state savings institution.

A. Any out-of-state savings institution that is insured by the Federal Deposit Insurance Corporation or other federal insurance agency, may acquire a Virginia savings institution holding company or a Virginia savings institution with the approval of the Commission. Such savings institution shall submit to the Commission an application for approval of such acquisition, which application may be approved if the Commission:

1. Determines that the laws of the state in which the savings institution making the acquisition has its principal place of business do not prohibit or unfairly impede a Virginia savings institution meeting the criteria in this article from acquiring savings institutions or savings institution holding companies in that state;

2. Determines that the laws of the state in which the savings institution making the acquisition has its principal place of business permit such savings institution to be acquired by the Virginia savings institution holding company or Virginia savings institution sought to be acquired;

3. Determines that the Virginia savings institution sought to be acquired has been in existence and continuously operating for more than two years or that all of the Virginia savings institution subsidiaries of the Virginia savings institution holding company sought to be acquired have been in existence and continuously operating for more than two years. The Commission may approve the acquisition by a savings institution of all or substantially all of the shares of a savings institution organized solely for the purpose of facilitating the acquisition of a savings institution that has been in existence and continuously operating as a savings institution for more than two years; and

4. Makes the acquisition subject to any conditions, restrictions, requirements or other limitations that would apply to the acquisition by a Virginia savings institution of a savings institution or savings institution holding company in the state where the savings institution making the acquisition has its principal place of business but that would not apply to the acquisition of a savings institution or savings institution holding company in such state by a savings institution located in that state.

B. An out-of-state savings institution that is insured by the Federal Deposit Insurance Corporation or other federal insurance agency and that has previously acquired a Virginia savings institution or Virginia savings institution holding company may acquire any additional Virginia savings institution or Virginia savings institution holding company with the approval of the Commission. Such savings institution shall submit to the Commission an application for approval of such acquisition, which application may be approved if the Commission:

1. Determines that the Virginia savings institution sought to be acquired has been in existence and continuously operating for more than two years. The Commission may approve the acquisition by a savings institution of all or substantially all of the shares of a savings institution organized solely for the purpose of facilitating the acquisition of a savings institution that has been in existence and continuously operating as a savings institution for more than two years; and

2. Makes the acquisition subject to any conditions, restrictions, requirements or other limitations that would apply to the acquisition by a Virginia savings institution of a savings institution or a savings institution holding company in the state where the savings institution making the acquisition has its principal place of business but that would not apply to the acquisition of a savings institution or a savings institution holding company in such state by a savings institution located in that state.

1985, c. 425, § 6.1-194.98; 1986, c. 500; 1990, c. 3; 1994, c. 353; 2010, c. 794.

§ 6.2-1159. Investigation of application; prescribed investigation period; shortening, lengthening or waiving of period; hearing; appeals.

A. For 90 days following receipt of a complete application under § 6.2-1157 or 6.2-1158, the Commission may conduct an investigation for the purpose of determining whether:

1. The proposed acquisition would be detrimental to the safety and soundness of the applicant or the Virginia savings institution or Virginia savings institution holding company that the applicant seeks to acquire or control;

2. The applicant, its directors and officers, if applicable, and any proposed new directors and officers, of the Virginia savings institution or Virginia savings institution holding company that the applicant seeks to acquire, are qualified by character, experience and financial responsibility to control and operate a Virginia savings institution or Virginia savings institution holding company;

3. The proposed acquisition would be prejudicial to the interests of the depositors, creditors, beneficiaries of fiduciary accounts or shareholders of the Virginia savings institution holding company or any Virginia savings institution that the applicant seeks to acquire or control; and

4. The acquisition is in the public interest.

B. The 90-day investigation period may be shortened or waived by the Commission, as it deems appropriate, if the Commission finds that it must act immediately in order to prevent the probable failure of a Virginia savings institution involved. The 90-day investigation period may be extended if the Commission determines that the applicant has not furnished all the information necessary to make the determination under § 6.2-1157 or 6.2-1158 or that the information submitted is substantially inaccurate or misleading.

C. Within the prescribed investigation period, or any extension thereof, and upon request of the applicant or the Virginia savings institution or Virginia savings institution holding company that the applicant seeks to acquire or control, or upon its own motion, the Commission may order a hearing concerning the proposed acquisition.

D. Within the prescribed investigation period, or any extension thereof, the Commission, by giving written notice of its decision and the reasons therefor to the applicant and to the Virginia savings institution or Virginia savings institution holding company that the applicant seeks to acquire or control, may: (i) approve the application, (ii) disapprove the application, or (iii) impose such conditions on the acquisition as the Commission may deem advisable to effect the purpose of this article.

1985, c. 425, § 6.1-194.99; 2010, c. 794.

§ 6.2-1160. Notice of intent to acquire out-of-state savings institution.

A Virginia savings institution, a Virginia savings institution holding company, or an out-of-state savings institution holding company owning subsidiaries that conduct a savings institution business in the Commonwealth shall file with the Commission notice of its intention to acquire a financial institution outside Virginia, together with such information as the Commission may request. The Commission shall within 30 days or an extended period not exceeding 15 days, disapprove such acquisition if it determines that the acquisition could affect detrimentally the safety or soundness of a Virginia savings institution. The Commission may approve such acquisition prior to the expiration of the 30-day period if it determines that the acquisition will not affect detrimentally the safety or soundness of such Virginia savings institution.

1985, c. 425, § 6.1-194.105; 1994, c. 353; 2010, c. 794.

§ 6.2-1161. Applicable laws and regulations; enforcement by Commission.

A. Any Virginia savings institution that is controlled by a savings institution holding company that is not a Virginia savings institution holding company shall be subject to all laws of the Commonwealth and all regulations under such laws that are applicable to Virginia savings institutions controlled by Virginia savings institution holding companies.

B. The Commission shall adopt such regulations, including the imposition of reasonable application and administration fees, as it finds necessary to implement the provisions of this article.

C. The Commission shall have the same powers to enforce the provisions of this article as those granted under Article 9 (§ 6.2-1191 et seq.) of this chapter.

1985, c. 425, §§ 6.1-194.102, 6.1-194.104; 2010, c. 794.

§ 6.2-1162. Periodic reports; interstate agreements.

A. The Commission may examine any out-of-state savings institution holding company owning a Virginia savings institution and each of its Virginia or non-Virginia savings institution or nonsavings institution subsidiaries and shall require reports of each savings institution holding company subject to this chapter. Such reports shall be filed under oath with such frequency and in such scope and detail as may be appropriate for the purpose of assuring continuing compliance with the provisions of this chapter.

B. Prior to approving an acquisition under the provisions of this article, the Commission shall enter into cooperative agreements with the appropriate regulatory authorities for the periodic examination of any savings institution holding company that has a Virginia savings institution subsidiary or any subsidiary of such holding company and may accept reports of examination and other records from such authorities in lieu of conducting its own examinations. The Commission may enter into joint actions with other regulatory authorities having concurrent jurisdiction over any savings institution holding company that has a Virginia savings institution subsidiary or may take such actions independently to carry out its responsibilities under this chapter, assure the safety and soundness of any Virginia savings institution, and assure compliance with the provisions of this chapter and the applicable savings institution laws of the Commonwealth.

1985, c. 425, § 6.1-194.103; 1994, c. 353; 2010, c. 794.

§ 6.2-1163. Application of article to bank or bank holding company.

For purposes of this chapter, any bank or bank holding company seeking to acquire a savings institution or savings institution holding company, shall be deemed to be a savings institution or savings institution holding company, as the case may be, for purposes of determining whether such bank or bank holding company is permitted to acquire the savings institution or savings institution holding company in question.

1987, c. 634, § 6.1-194.107; 2010, c. 794.

§ 6.2-1164. Acquisitions of state savings bank or holding companies by out-of-state financial institutions.

A state savings bank, or holding company thereof, may not be acquired by a financial institution, or financial institution holding company, whose principal place of business is outside the Commonwealth, except in accordance with the provisions of this article.

1991, c. 230, § 6.1-194.132; 2010, c. 794.

§ 6.2-1165. Nonseverability.

Notwithstanding the provisions of § 1-243, if any portion of this article pertaining to the terms and conditions for and limitations upon acquisition of Virginia savings institution holding companies and Virginia savings institutions by savings institutions and savings institution holding companies that do not have their principal place of business in the Commonwealth is determined to be invalid for any reason by a final nonappealable order of any appropriate Virginia or federal court, then §§ 6.2-1157 through 6.2-1164 shall be void and of no further effect from the effective date of such order. Any transaction that has been lawfully consummated pursuant to this article prior to a determination of invalidity shall be unaffected by such determination.

1985, c. 425, § 6.1-194.106; 1994, c. 353; 2010, c. 794.

Article 6 - ACCOUNTS

§ 6.2-1166. Accounts of state savings institutions.

Notwithstanding any restriction in its articles of incorporation limiting the number, kinds and classes of accounts that it may offer, a state savings institution may offer such accounts, including checking accounts, time deposit accounts, and savings accounts, as its board of directors may authorize from time to time. A state savings institution may pay interest on such accounts at such rates and under such terms and conditions as its board of directors may direct from time to time, subject to any restrictions and limitations imposed by state or federal law on the payment of interest.

1985, c. 425, § 6.1-194.49; 1991, c. 230, § 6.1-194.133; 2010, c. 794.

§ 6.2-1167. Rules governing withdrawal.

A. The holder of a savings account in a savings institution shall have the right to withdraw all or any part of his account. A savings institution shall have the right to establish the rules governing the withdrawals and may from time to time fix the period of notice required to be given for withdrawal. In no event shall a savings institution delay or postpone the whole or partial payment of the value of any savings account pursuant to a written withdrawal application by a savings account holder for a period exceeding 30 days following the receipt of such application without first securing written permission from the Commissioner.

B. The holder of a federal tax and loan account or note account as defined in regulations of the U.S. Treasury Department or other federal agency shall have the right of immediate withdrawal of all or any part of such account. In no event shall a savings institution delay or postpone the whole or partial payment of such an account pursuant to a written application by the account holder.

Code 1950, § 6-201.21; 1960, c. 402; 1966, c. 584, § 6.1-148; 1972, c. 796, § 6.1-195.21; 1979, c. 76; 1985, c. 425, § 6.1-194.50; 1990, c. 3; 1991, c. 230, § 6.1-194.134; 2010, c. 794.

§ 6.2-1168. Redemption.

At any time that funds are on hand for the purpose, a mutual savings institution shall have the right to redeem by lot or otherwise, as the board of directors may determine, all or any part of any of its savings accounts on an earnings date by giving 30 days' notice by certified mail addressed to each affected account holder at his last address as recorded on the books of the institution. No mutual savings institution shall redeem any of its savings accounts when its liabilities exceed its assets or when it has applications for withdrawal that have been on file more than 30 days and have not been reached for payment. The redemption price of savings accounts redeemed shall be the full value of the account redeemed, as determined by the board of directors, but in no event shall the redemption price be less than the withdrawal value. If the notice of redemption has been duly given, and if on or before the redemption date the funds necessary for such redemption have been set aside to be, and continue to be, available therefor, interest upon the accounts called for redemption shall cease to accrue from and after the date specified as the redemption date. All rights with respect to such accounts shall terminate upon the redemption date, other than any right of the account holder of record to receive the redemption price without interest. Accounts called for redemption, if unclaimed, shall be subject to the Virginia Disposition of Unclaimed Property Act (§ 55.1-2500 et seq.).

1985, c. 425, § 6.1-194.51; 2010, c. 794.

§ 6.2-1169. Accounts of savings institutions as legal investments and as security.

Administrators, executors, custodians, conservators, guardians, trustees, and other fiduciaries, insurance companies, business and manufacturing companies, banks, trust companies, credit unions and other types of similar financial organizations, charitable, educational, and eleemosynary funds and organizations, and all agencies, localities, and other political subdivisions and governmental units of the Commonwealth are specifically authorized to invest funds held by them, without any order of any court, in accounts of savings institutions authorized to do business in the Commonwealth. Such investments shall be deemed and held to be legal investments for such funds. The provisions of this section are supplemental to any and all other laws relating to and declaring what shall be legal investments for the persons referred to in this section.

1972, c. 796, § 6.1-195.50; 1985, c. 425, § 6.1-194.52; 2010, c. 794.

§ 6.2-1170. Deposits of federal taxes and U.S. Treasury tax and loan accounts.

Savings institutions may:

1. Serve as depositories for federal taxes and for U.S. Treasury tax and loan deposits;

2. Satisfy any requirements in connection therewith, including maintaining tax and loan accounts and note accounts, as defined by regulations of the U.S. Treasury Department or other federal agency;

3. Pledge collateral; and

4. Satisfy the requirements of the U.S. Treasury Department in connection with such deposits.

1979, c. 77, § 6.1-195.22:2; 1985, c. 425, § 6.1-194.53; 1990, c. 3; 1991, c. 230, § 6.1-194.135; 2010, c. 794.

§ 6.2-1171. Accounts under federal Self-Employed Individuals Tax Retirement Act and federal Employee Retirement Income Security Act of 1974 (P.L. 93-406, 88 Stat. 829).

A. To the extent allowed by federal law, an insured savings institution may act as trustee or custodian under the federal Self-Employed Individuals Tax Retirement Act of 1962, as amended. Funds held as such trustee or custodian may be invested in accounts of the association to the extent that the trust, custodial or other plan does not prohibit such investment.

B. To the extent allowed by federal law, an insured savings institution may act as trustee or custodian of individual retirement accounts under the federal Employee Retirement Income Security Act of 1974 (P.L. 93-406, 88 Stat. 829), as amended. Contributions may be accepted and interest thereon retained by such institution pursuant to forms provided by it and may be invested in accounts of the institution in accordance with the terms upon which such contributions were accepted.

1972, c. 796, § 6.1-195.49; 1975, c. 79, § 6.1-195.49:1; 1985, c. 425, § 6.1-194.54; 1986, c. 509; 2010, c. 794.

§ 6.2-1172. Accounts issued in name of minor.

A savings institution may issue accounts to a minor as sole and absolute owner of the account. With respect to any such account, a savings institution may (i) receive deposits by or for the minor owner, (ii) pay withdrawals, (iii) accept pledges to the association, and (iv) act in any other manner with respect to such accounts on the order of the minor owner. Any payment or delivery of funds from such account to its owner, or payment of a check or other written order for withdrawal signed by its minor owner, shall be a valid and sufficient release and discharge of the institution for any payment or delivery so made. The parent or guardian of the minor owner shall not in his capacity as parent or guardian have the power to withdraw or transfer funds in any such account unless the minor has given written notice to the association to accept the signature of such parent or guardian.

Code 1950, § 6-201.23; 1960, c. 402; 1966, c. 584, § 6.1-150; 1972, c. 796, § 6.1-195.25; 1985, c. 425, § 6.1-194.55; 2010, c. 794.

§ 6.2-1173. Powers of attorney on accounts.

Any savings institution may continue to recognize the authority of an attorney-in-fact authorized in writing to manage or to make withdrawals, either in whole or in part, from any account until it receives written notice or is on actual notice of the revocation of his authority. For the purposes of this section, written notice of death of the owner of the account shall constitute written notice of revocation of the authority of his attorney. Written notice of the adjudication of incapacity of an account owner shall constitute written notice of revocation of the authority of his attorney unless under the laws of the Commonwealth the authority of the attorney-in-fact survives such adjudication. Payment of the account in accordance with the provisions of this section shall constitute a full discharge and acquittance of the association as to such account.

1972, c. 796, § 6.1-195.27; 1985, c. 425, § 6.1-194.56; 1997, c. 801; 2010, c. 794.

§ 6.2-1174. Accounts of deceased or incompetent persons.

A. A savings institution may pay funds held in the account of a deceased person or a person under disability to the personal representative, committee, conservator, guardian, or curator of such person upon proper proof of the appointment and qualification of such fiduciary. Any savings institution making such payment shall not thereafter be liable for the amount thereof to any person. The presentation of a duly certified letter or certificate of qualification as personal representative or other fiduciary shall be conclusive proof of the jurisdiction of the court issuing the same.

B. A savings institution that has not received written notice and is not on actual notice that an account owner is deceased or has been adjudicated incompetent may pay or deliver funds held in such person's account in accordance with the provisions of the account contract without liability to any person for the amounts so paid or delivered.

Code 1950, § 6-201.25; 1960, c. 402; 1966, c. 584, § 6.1-152; 1972, c. 796, § 6.1-195.28; 1985, c. 425, § 6.1-194.57; 2010, c. 794.

§ 6.2-1175. Repealed.

Repealed by Acts 2010, c. 269, cl. 2.

§ 6.2-1176. Accounts of fiduciaries.

A savings institution may issue accounts in the name of any administrator, executor, custodian, conservator, guardian, trustee, or other fiduciary for a named beneficiary or beneficiaries. The payment of funds from any such account pursuant to a check or other written order of withdrawal signed by the fiduciary, the delivery of funds in such account to such fiduciary, or a receipt signed by any such fiduciary with regard to the payment of funds from such account, shall be a valid and sufficient release and discharge of the institution for the payment or delivery so made.

1985, c. 425, § 6.1-194.59; 2010, c. 794.

§ 6.2-1177. Savings institution need not inquire as to fiduciary funds deposited in fiduciary's personal account.

If any fiduciary or agent makes a deposit in a savings institution to his personal credit of checks drawn by him upon an account in his own name as fiduciary, or of checks drawn by him upon an account in the name of his principal, if he is empowered to draw checks thereto, or of checks payable to his principal and endorsed by him as fiduciary, the institution receiving the deposit:

1. Shall not be required to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary; and

2. Is authorized to pay the amount of the deposit or any part thereof upon the withdrawal by the fiduciary without being liable to the principal, unless the institution receives the deposit or pays the withdrawal with (i) actual knowledge that the fiduciary, in making such deposit or in making such withdrawal, is committing a breach of his obligation as fiduciary or (ii) knowledge of such facts that its action in receiving the deposit or paying the withdrawal amounts to bad faith.

1980, c. 329, § 6.1-195.27:1; 1985, c. 425, § 6.1-194.60; 2010, c. 794.

§ 6.2-1178. Accounts held by various trustees for same beneficiary.

Whenever trust interests or accounts are created for the same beneficiary, and each interest or account is in the name of a separate and distinct trustee or combination of trustees, each trust interest or account shall constitute a separate, distinct, and valid trust entity for all purposes.

Code 1950, § 6-201.22:1; 1966, cc. 219, 584, § 6.1-149.1; 1972, c. 796, § 6.1-195.24; 1985, c. 425, § 6.1-194.61; 2010, c. 794.

Article 7 - REAL ESTATE LOANS

§ 6.2-1179. Real estate loans; required investment.

A. A state savings institution may originate, invest in, sell, purchase, service, participate, or otherwise deal in loans secured by a lien on real estate, subject to the requirements of this chapter. Such loans that are insured, guaranteed or made under a firm commitment to be sold, assigned or otherwise transferred to an agency or instrumentality of the federal government or to a corporation organized under the laws of the United States, including the Department of Housing and Urban Development, the Department of Veterans Affairs, the Federal National Mortgage Association, the Government National Mortgage Association or the Federal Home Loan Mortgage Corporation, may be made in accordance with the requirements of such federal agencies, instrumentalities or corporations.

B. At least 60 percent of assets of a state savings institution shall be invested in real estate loans. For purposes of meeting this 60-percent requirement, a savings institution may include (i) loans secured by a lien on a manufactured building or buildings; (ii) the value of securities held by it that represent a beneficial interest, participation interest or other similar interest in loans secured by a lien on real estate including participation certificates issued by the Federal National Mortgage Association, Government National Mortgage Association or the Federal Home Loan Mortgage Corporation; and (iii) the value of liquid assets equal to the minimum liquid asset requirement for membership in a Federal Home Loan Bank.

C. A state savings institution may not purchase, participate in or acquire an interest in any real estate loan that it could not legally make, without the prior approval of the Commissioner.

1985, c. 425, § 6.1-194.62; 1990, c. 3; 2010, c. 794.

§ 6.2-1180. Appraisals; loan-to-value ratios.

A. A savings institution may make a real estate loan only after a qualified person designated by the savings institution has submitted a signed appraisal of the security property, except that an insured or guaranteed loan may be made on the basis of a valuation of the security property furnished to the savings institution by the insuring or guaranteeing agency.

B. At the time of origination, a real estate loan may not exceed 100 percent of the appraised fair market value of the security property. During the term of the loan, the loan-to-value ratio may increase above the maximum permissible percentage if the increase results from an adjustment authorized by § 6.2-1182. In the case of a home loan secured by borrower-occupied property, the loan balance may not exceed 125 percent of the original appraised value of the property during the term of the loan, unless the loan contract provides that the payment shall be adjusted at least once every five years, beginning no later than the 10th year of the loan, to a level sufficient to amortize the loan at the then-existing interest rate and loan balance for the remaining term of the loan. The 125 percent limitation shall not apply to that portion of a loan balance that is interest received in the form of a percentage of the appreciation in value of the security property.

1985, c. 425, § 6.1-194.63; 1991, c. 230, § 6.1-194.151; 2010, c. 794.

§ 6.2-1181. Initial repayments on real estate loans.

Repayments on real estate loans shall begin not later than 60 days after the loan proceeds are disbursed. If such loan is for construction, substantial alteration, repair, or improvement of the real estate securing the loan, repayments may begin not later than 60 months after the date of the first loan disbursement, and interest shall be payable at least semiannually until regular periodic payments begin. In the case of a home loan where the loan proceeds are to be used for construction, substantial alteration, repair, or improvement of the security property, repayments must begin not later than 36 months after the date of the first disbursement, with interest payable at least semiannually until regular periodic payments begin.

1985, c. 425, § 6.1-194.64; 1991, c. 230, § 6.1-194.151; 2010, c. 794.

§ 6.2-1182. Adjustable real estate loans.

A state savings institution may adjust the interest rate, payment, balance, or term to maturity on any real estate loan as authorized by the loan contract, and may receive a portion of the consideration for making a real estate loan in the form of a percentage of the amount by which the current market value of the property, during the loan term or at maturity, exceeds the original appraised value.

1985, c. 425, § 6.1-194.65; 1991, c. 230, § 6.1-194.151; 2010, c. 794.

§ 6.2-1183. Special provisions for home loans.

The loan term of a home loan shall not exceed 40 years, with interest payable at least semiannually, except as expressly authorized elsewhere in this chapter. Payments on the loan balance, for other than nonamortized and line-of-credit loans, shall be made in at least semiannual installments, except that loans made on the security of farm residences and combinations of farm residences and commercial farm real estate may be repayable in annual installments. The loan may be fully amortized, partially amortized, nonamortized, or a line-of-credit loan. The loan contract may provide for the deferral of principal and capitalization of a portion of interest, or of all interest on loans to natural persons secured by borrower-occupied property and on which periodic advances are being made.

1985, c. 425, § 6.1-194.66; 1991, c. 230, § 6.1-194.151; 2010, c. 794.

§ 6.2-1184. Dealing with successors in interest.

In the case of any investment made by a savings institution in a real estate loan, if (i) the ownership of the real estate security or any part thereof becomes vested in a person other than the party originally executing the security instruments and (ii) there is not an agreement in writing to the contrary, a savings institution may, without notice to such party, deal with such successor in interest with reference to that mortgage and the debt thereby secured in the same manner as with such party. The savings institution may forbear to sue or may extend time for payment, or otherwise modify the terms, of the debt secured thereby without discharging or in any way affecting the original liability of such party or parties thereunder or upon the debt thereby secured.

1985, c. 425, § 6.1-194.67; 2010, c. 794.

§ 6.2-1185. Trustees on loans secured by deed of trust.

Any savings institution in connection with making loans secured by deed of trust is empowered to elect a trustee, which may be a service corporation, at such times and for such terms as may be prescribed by its charter or bylaws. All the rights, titles, duties, and obligations of such a trustee relating to loans secured by deed of trust shall pass by operation of law to his successor in office. Every right of the savings institution required to be exercised by or through such trustee, whether it is the sale of property or some other act, shall be done, enforced and carried out by the trustee in office at the time when such rights are exercised by or for the savings institution. All sales or conveyances heretofore or hereafter made by a trustee appointed in the manner designated in this section shall be as valid and binding as though the sale or conveyance had been made by the trustee named in the deed of trust. A majority of the trustees in office are empowered to conduct sales and make conveyances in pursuance thereof with the same force and effect as though all the trustees had acted; and when there are two trustees either one may act.

1985, c. 425, § 6.1-194.68; 2010, c. 794.

Article 8 - OTHER LOANS AND INVESTMENTS

§ 6.2-1186. General investment authority of state savings institutions.

A. Subject to the powers and limitations regarding real estate loans set forth in § 6.2-1179, and except as provided in § 6.2-1187 with respect to state savings banks, the assets of a state savings institution may be invested only:

1. In real and personal property necessary for the conduct of its business and in real estate to be held for its future accommodation. A savings institution may invest in an office building or buildings and appurtenances for the transaction of its business, or for the transaction of such business and for rental. Except as provided in § 6.2-1187 with respect to savings banks, no such investment described in the preceding sentence may be made without the prior approval of the Commissioner if the total amount of the investment exceeds 50 percent of capital stock paid-in and unimpaired and 50 percent of unimpaired combined surplus and undivided profits, or, in the case of a mutual association, 50 percent of general reserve and surplus;

2. In stock and other securities or obligations of a service corporation. Unless specifically authorized by the Commissioner, a state savings institution shall not invest more than 10 percent, in the aggregate, of its assets in the investments specified in this subdivision. A service corporation may charge and collect such finance charges, fees and interest rates as state savings institutions are authorized to charge and collect. A service corporation, directly or indirectly, may engage in providing real estate brokerage services for property owned by a state savings institution owning capital stock in the service corporation, by the service corporation, or a joint venture in which the service corporation is a participant, but no service corporation, state savings institution or holding company that has control, as defined in § 6.2-701, over a state savings institution may engage directly or indirectly in providing real estate brokerage services for property owned by third parties. Nothing in this subdivision shall prohibit (i) a state savings bank or its affiliates or (ii) a holding company that has control over a state savings institution from engaging in third party real estate brokerage in any state, other than the Commonwealth, that permits such activities by its state chartered savings institutions, or their affiliates or holding companies;

3. If the savings institution is a state association, in the purchase of real estate for the purpose of producing income or for inventory and sale or for improvement including the erection of buildings thereon, for sale or rental purposes, and such an association may hold, sell, lease, operate or otherwise exercise the rights of an owner of any such property. Unless specifically authorized by the Commissioner, a state association shall not invest more than 10 percent, in the aggregate, of its assets in the investments specified in this subdivision;

4. In obligations that are fully guaranteed as to principal and interest by the United States or the Commonwealth;

5. In stock or obligations of any Federal Home Loan Bank or Federal Reserve Bank;

6. In obligations of, or issued by, any other state or political subdivision thereof, so long as such obligations continue to hold one of the four highest national investment grade ratings;

7. In obligations of, or issued by, any locality, district, or other political subdivision of the Commonwealth, or any public instrumentality or public authority created by act of the General Assembly, so long as such obligations continue to hold one of the four highest national investment grade ratings;

8. If the savings institution is a state association, in deposits in banks for savings and loan associations;

9. In stock, obligations or other instruments of the Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, or any successor thereto;

10. In obligations of, or guaranteed as to principal and interest by, Canada or any province thereof, provided that the principal and interest of any such obligations are payable in United States funds;

11. In demand, time, or savings deposits, shares or accounts, or other obligations of any financial institution the accounts of which are insured by a federal agency or other insurer approved by the Commissioner;

12. In bankers' acceptances that are eligible for purchase by Federal Reserve Banks;

13. In loans to individuals for personal, family or household purposes and loans reasonably incident thereto, including loans to dealers in consumer goods for purposes of financing inventory and floor planning. Such loans may be evidenced by installment consumer paper that is transferred to a savings institution by an endorser or guarantor, provided that such paper shall carry a full or limited endorsement or guarantee of the person transferring the same and the savings institution shall have a certificate of a responsible officer designated by its board for that purpose stating that the responsibility of the maker of such obligation has been evaluated and the savings institution is relying primarily upon such maker for the payment of such obligation;

14. Loans secured by savings accounts of the association;

15. In unsecured single payment personal loans to individuals with a term of not more than 12 months;

16. In personal property, which term as used herein shall include fixtures, acquired upon the specific request of and for lease to a customer, subject to the following limitations:

a. The rentals receivable by the association under the initial lease of any item of personal property shall at least equal the cost to the savings institution of such item of personal property;

b. The savings institution shall have a certificate of a responsible officer designated by its board for that purpose stating that the responsibility of the lessee has been evaluated and approved by such officer; and

c. Upon the expiration of any lease, whether by virtue of the lease agreement or by virtue of the retaking of possession by the association, such personal property shall be relet, sold or otherwise disposed of, or charged off within one year from the time of expiration of such lease;

17. In secured or unsecured credit to cover payment of checks, drafts or other fund transfer orders in excess of the available balance of an account on which they are drawn. Such extensions of credit must be paid off within 30 days after the extension of credit is made. The 30-day limitation on repayment shall apply only to inadvertent overdrafts by the account owner, and shall not apply to extensions of credit, agreed upon in writing, whereby the borrower is permitted to access the line of credit by check, draft or other fund transfer order;

18. In loans for commercial, corporate, business or agricultural purposes. Unless specifically authorized by the Commissioner, (i) a state association shall not invest more than 10 percent of its assets, and (ii) a state savings bank shall not invest more than 20 percent of its assets, in loans for commercial, corporate, business or agricultural purposes. The percentage-of-assets limitations in the preceding sentence shall not apply to overdraft loans, commercial real estate loans, loans to a service corporation the stock of which is owned by the savings institution, or loans to dealers in consumer goods for inventory or floor planning financing;

19. In commercial paper rated in the highest or second highest categories as of the date of purchase, as shown by the most recently published rating by at least two nationally recognized investment rating services;

20. In corporate debt securities, including corporate debt securities convertible into stock, that may be sold with reasonable promptness at a price that corresponds reasonably to their fair market value, and that are rated in at least the third highest category by a nationally recognized investment rating service in its most recently published ratings before the date of purchase of the security;

21. In shares in open-end management investment companies; and

22. Any other obligations, instruments or investments that are specifically approved by the Commissioner.

B. In addition to the items authorized by subsection A, a state savings institution may:

1. Issue credit cards, extend credit in connection therewith, and otherwise engage in or participate in credit card operations; and

2. Issue commercial and standby letters of credit in conformance with the Uniform Commercial Code (§ 8.1A-101 et seq.) or the Uniform Customs and Practice for Documentary Credits published as International Chamber of Commerce publication No. 600, and may pledge collateral to secure its obligations thereunder, subject to the following requirements:

a. Each letter of credit shall conspicuously state that it is a letter of credit;

b. The issuer's undertaking shall contain a specified expiration date or be for a definite term, and shall be limited in amount;

c. The issuer's obligation to pay shall be solely dependent upon the presentation of conforming documents as specified in the letter of credit, and not upon the factual performance or nonperformance by the parties to the underlying transaction; and

d. The account party shall have an unqualified obligation to reimburse the issuer for payments made under the letter of credit.

C. The Commission may adopt such regulations as may be required to prevent excessive aggregate amounts of lending by an association to any one individual or entity.

Code 1950, § 6-201.29; 1960, c. 402; 1962, c. 170; 1964, c. 151; 1966, c. 584, § 6.1-157; 1968, c. 255; 1970, c. 237; 1972, c. 796, § 6.1-195.34; 1974, c. 284; 1975, c. 448; 1976, cc. 263, 487; 1977, c. 140; 1978, c. 351; 1979, c. 81; 1980, c. 706; 1981, c. 59; 1982, c. 209; 1983, c. 447; 1985, c. 425, § 6.1-194.69; 1986, c. 509; 1988, c. 4; 1989, cc. 28, 396, 626; 1990, c. 3; 1991, c. 230, § 6.1-194.136; 1992, c. 51; 1994, c. 330; 2003, c. 353; 2010, c. 794.

§ 6.2-1187. Investment authority of state savings banks.

Notwithstanding any provision of § 6.2-1186 to the contrary:

1. A state savings bank shall not invest in an office building or buildings and appurtenances for the transaction of its business, or for the transaction of such business and for rental, without the prior approval of the Commissioner if the total amount of the investment exceeds the aggregate amount of the savings bank's unimpaired capital fund;

2. A service corporation described in subdivision A 2 of § 6.2-1186 in which a savings bank invests shall be subject to state and local taxation in the same manner as are savings banks;

3. The assets of a state savings bank may be invested in stock or obligations of the Federal Deposit Insurance Corporation;

4. The assets of a state savings bank may be invested in commercial paper eligible for purchase by Federal Reserve Banks;

5. A state savings bank shall not invest more than 20 percent of its assets in loans the primary security for which is nonresidential real estate; and

6. A state savings bank shall conform to the loans-to-one-borrower limitations contained in § 6.2-875.

1991, c. 230, § 6.1-194.136; 1994, c. 330; 2003, c. 353; 2010, c. 794.

§ 6.2-1188. Effect of repeal or amendment of statute or regulation on existing loan or investment.

Any investment or loan that was in compliance with the provisions of this chapter or a regulation of the Commission in existence when such investment or loan was made shall remain a legal investment or loan even though the power to make such investment or loan in the future is amended or revoked by regulation or by action of the General Assembly.

1985, c. 425, § 6.1-194.70; 1991, c. 230, § 6.1-194.137; 2010, c. 794.

§ 6.2-1189. Limitation on liability of savings institutions making loans for certain purposes.

A savings institution that makes a loan, the proceeds of which are used or may be used by the borrower to finance the purchase, design, manufacture, construction, repair, modification, or improvement of real or personal property for personal use, or for sale or lease to others, or for the acquisition or operation of a business, shall not be held liable to such borrower or to any third persons (i) for any loss or damage occasioned by any defect in the real or personal property so purchased, designed, manufactured, constructed, repaired, modified, or improved, (ii) for any loss or damage resulting from the failure of the borrower to use due care in the design, manufacture, construction, repair, modification, or improvement of any such real or personal property, or (iii) for the acts or omissions of the borrower in acquisition or operation of a business, unless such loss or damage is a result of an action of the savings institution outside the scope of its business as a savings institution, or unless the institution has knowingly been a party to misrepresentations with respect to such real or personal property.

1972, c. 796, § 6.1-195.6; 1985, c. 425, § 6.1-194.71; 1987, c. 335; 2010, c. 794.

§ 6.2-1190. Perfection of certain security interests.

When securities are sold by a savings institution subject to an obligation of repurchase, any security interest or interest of ownership therein may be perfected (i) as specified by Title 8.8 or Title 8.9A; (ii) by designation to the person holding physical custody thereof, which shall include a person keeping the master records, in case of securities identified by book entry only, that certain securities identified by serial number or dollar amount are held for the benefit of third parties other than the savings institution, who may, but need not be, identified by name; or (iii) by physical separation on the premises of the savings institution in a separate drawer, compartment, or other facility. The savings institution may, from time to time, instruct any third party holding such securities that the previously identified securities or an amount of such securities previously identified as pledged or belonging to third parties, have been released from such pledge by payment of all or part of the amount due, or have been repurchased. There shall be an identification on the records of the savings institution of the persons who are pledgees or owners of such securities.

1983, c. 446, § 6.1-195.22:3; 1985, c. 425, § 6.1-194.72; 1986, c. 509; 2010, c. 794.

Article 9 - SUPERVISION

§ 6.2-1191. General supervisory powers of Commission.

The Commission shall have general supervisory powers with respect to all state associations, state savings banks and their holding companies, foreign savings institutions transacting business in the Commonwealth, savings institution holding companies whose principal place of business is located in the Commonwealth, service corporations that are owned or controlled by one or more state savings banks, service corporations the principal offices of which are located in the Commonwealth or that are owned or controlled by one or more state associations, and any other person who is subject to the provisions of this chapter.

1985, c. 425, § 6.1-194.73; 1991, c. 230, § 6.1-194.139; 2010, c. 794.

§ 6.2-1192. Regulations.

A. The Commission may adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to present evidence and be heard, in accordance with the Commission's Rules.

B. The Commission may adopt such regulations as may be necessary to permit state savings institutions to have powers comparable with those of federal savings institutions, regardless of any then existing statute, regulation or court decision limiting or denying such powers to state savings institutions. The requirement of a public hearing shall not automatically apply to regulations adopted under this subsection, but the Commission may have such hearing as it deems appropriate.

C. The Commission may adopt regulations governing savings institution holding companies doing business in the Commonwealth, including the activities of such companies and their subsidiaries.

D. The Commissioner shall publish and mail to each state savings institution and foreign savings institution doing business in the Commonwealth a copy of all regulations of the Commission in effect pertaining to such savings institutions at such times as he may deem proper.

E. Regulations adopted by the Commission shall continue in effect until amended or revoked by the Commission or superseded by action of the General Assembly.

1972, c. 796, § 6.1-195.72; 1985, c. 425, §§ 6.1-194.74, 6.1-194.75, 6.1-194.76, 6.1-194.87; 1990, c. 3; 1991, c. 230, §§ 6.1-194.140, 6.1-194.141, 6.1-194.142; 1996, c. 16; 2010, c. 794.

§ 6.2-1193. Statements to be furnished by Commission to directors of savings institutions.

The Commission shall prepare and make available to each member of the board of directors of every state savings institution a statement describing generally their duties and responsibilities. The statement shall include a brief outline of the examining procedure employed by the Commission, an explanation of the distinction between an examination and an audit, and any information that the Commission deems necessary to apprise the directors of the necessity for an adequate system of internal controls.

Code 1950, § 6-201.59; 1960, c. 402; 1966, c. 584, § 6.1-189; 1972, c. 796, § 6.1-195.69; 1985, c. 425, § 6.1-194.77; 1991, c. 230, § 6.1-194.143; 2010, c. 794.

§ 6.2-1194. State savings institutions to furnish financial statements and reports.

A. Every state savings institution shall furnish the Commission within 30 days after the close of its fiscal year a statement of its financial condition on forms supplied by the Commission. The statements shall be made in accordance with forms prescribed by the Commission, certified under oath by the president or treasurer of the savings institution, and attested by at least three of its directors. Insofar as practicable, the reports required by this section shall conform to those required of savings institutions insured by any instrumentality of the federal government that insures or regulates savings institutions. The Commission shall allow state savings institutions to submit the statements electronically. Any state association that submits such statements electronically shall maintain a copy of the statement with the required certified signatures affixed.

B. Every state savings institution shall make such other reports as the Commission may from time to time require.

Code 1950, § 6-201.57; 1960, c. 402; 1966, c. 584, § 6.1-187; 1972, c. 796, § 6.1-195.67; 1985, c. 425, § 6.1-194.78; 1991, c. 230, § 6.1-194.144; 1996, c. 14; 1997, c. 407; 2010, c. 794.

§ 6.2-1195. Examination of state savings institutions and affiliates by Commissioner; report of examination.

A. As used in this section, the term "affiliate of any state savings institution" means any entity (i) of which the state savings institution, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 percent of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons, exercising similar functions, (ii) of which control is held, directly or indirectly, through stock ownership or in any other manner, by the shareholders of such state savings institution who own or control either a majority of the shares of the state savings institution or more than 50 percent of the number of shares voted for the election of directors of the state savings institution at the preceding election, or by trustees for the benefit of the shareholders of the state savings institution, or (iii) of which a majority of the directors, trustees, or other persons exercising similar functions are directors of the state savings institution.

B. The Commissioner shall, not less than once during any period of three consecutive calendar years, or at such additional times as he deems necessary, with or without previous notice, examine each state savings institution. A copy of the report of all examinations shall be furnished to the savings institution. The report shall be presented by the president or other chief executive officer to the directors at their next meeting.

C. No other copies of a report of examination shall be made except as necessary for review by officers and directors of the state savings institution. Copies of the report made for officers and directors of the savings institution shall not be removed from the premises of such savings institution and shall be destroyed after the review has been completed. The original examination report shall be kept among the records of the Bureau. Upon resolution of the board of directors of a savings institution, examination reports may be inspected in the savings institution by such other persons as the board may specify.

D. In connection with the examination of any state savings institution, the Commission may make or cause to be made an examination of the affiliates of the state savings institution as shall be necessary to ascertain the financial condition of the savings institution and disclose fully the relations between the savings institution and its affiliates and the effect of such relations upon the affairs of the savings institution.

E. Upon written application made to the Commission by the board of directors or by the stockholders representing two-fifths of the total outstanding capital stock of any savings institution incorporated under the laws of and doing business in the Commonwealth, or when, in the judgment of the Commission, it may be necessary for the protection of the public or of persons depositing or dealing with such state savings institution, the Commission shall cause to be made a special examination of such state savings institution. All expenses incident to such special examination may be charged to the state savings institution so examined and shall be paid by the savings institution so charged.

Code 1950, § 6-201.54; 1960, c. 402; 1966, c. 584, § 6.1-184; 1972, c. 796, § 6.1-195.64; 1976, c. 82; 1985, c. 425, § 6.1-194.79; 1991, c. 230, § 6.1-194.145; 1992, c. 224; 1996, c. 80; 1997, c. 50; 2010, c. 794.

§ 6.2-1196. Access to books and evidence of debt; examination of directors, officers, and employees under oath.

A. The officers, directors, and employees of every savings institution doing business in the Commonwealth shall, upon the demand of the person designated by law to make any examination of the institution:

1. Give to such examiner full access to all money, books, papers, notes, bills, and other evidence of debt of the savings institution;

2. Disclose fully and truly all of its indebtedness and liability; and

3. Furnish the examiner with all information that the examiner deems necessary to a full investigation into the affairs of the savings institution.

B. The Commission may examine under oath any and all of the directors, officers, clerks, and employees of a savings institution touching any matter or thing connected with the operation of the savings institution. Any duly authorized examiner shall have the authority to administer oaths to the persons examined.

Code 1950, § 6-201.56; 1960, c. 402; 1966, c. 584, § 6.1-186; 1972, c. 796, § 6.1-195.66; 1985, c. 425, § 6.1-194.80; 1991, c. 230, § 6.1-194.146; 2010, c. 794.

§ 6.2-1197. False statements; penalty.

Any officer, director, or agent of a savings institution who knowingly makes a false statement of the condition of the institution to the Commission is guilty of a Class 6 felony.

Code 1950, § 6-201.62; 1960, c. 402; 1966, c. 584, § 6.1-192; 1972, c. 796, § 6.1-195.73; 1985, c. 425, § 6.1-194.81; 1991, c. 230, § 6.1-194.147; 2010, c. 794.

§ 6.2-1198. Audits.

The Commission may require a savings institution doing business in the Commonwealth to have an audit made of its books, records and methods of operation, whenever it appears to the Commission that the system of internal controls is not adequate or that the savings institution is engaging in dangerously unsound practices or that the financial condition of the institution makes it necessary.

Code 1950, § 6-201.58; 1960, c. 402; 1966, c. 584, § 6.1-188; 1972, c. 796, § 6.1-195.68; 1985, c. 425, § 6.1-194.82; 1991, c. 230, § 6.1-194.148; 2010, c. 794.

§ 6.2-1199. Powers of Commission in case of nonobservance of law, noncompliance with orders, insufficient reserves or insolvency; appointment of Federal Deposit Insurance Corporation as receiver.

A. If the Commission finds that: (i) the laws of the Commonwealth are not being fully observed by a savings institution doing business in the Commonwealth; (ii) a savings institution is being operated in an unsafe or unsound manner; (iii) the institution has failed to comply with the lawful orders of the Commission; (iv) the reserve of the institution is insufficient for the protection of account holders; or (v) a savings institution is, or is about to become, insolvent, it shall give immediate notice thereof to the officers and directors of the institution. If necessary to conserve the assets of the institution or to protect the interests of its account holders or the public interest, the Commission may, after reasonable notice to the institution and opportunity for it to be heard:

1. Close the institution for a period not exceeding 60 days, which period may be further extended for a like period or periods as the Commission deems necessary;

2. Require the officers and directors of the institution to liquidate, insofar as is required, its outstanding loans;

3. Require that all lawful orders of the Commission be complied with;

4. Require the institution to make reports daily or at such other times as it may require as to the results achieved in carrying out its orders;

5. Temporarily suspend the right of such institution to receive any further deposits;

6. Without examination, close, for such period or periods as the Commission may deem necessary, any savings institution facing an emergency due to withdrawal of deposits or otherwise, or, without closing such savings institution, grant to it the right to suspend or limit the withdrawal of deposits, for such period as the Commission may determine; or

7. Require that the savings institution desist from those activities that have resulted in the unsafe or unsound operation of the institution.

B. If the Commission determines that a receiver should be appointed for a savings institution, the Commission may close the doors of the institution, take charge of the books, assets and affairs of the institution, and apply to any court in the Commonwealth having jurisdiction to appoint receivers for the appointment of a receiver to take charge of the institution's business and assets. Proceedings for the appointment of a receiver of a savings institution shall not be entertained by any court except on the application of the Commission.

C. In any case where the Commission finds that an insured savings institution is insolvent or about to become insolvent, the Commission may seek the appointment of the Federal Deposit Insurance Corporation as receiver for the savings institution. The court may appoint the Federal Deposit Insurance Corporation as receiver for the savings institution if it finds that to do so would be in the public interest. Upon its being appointed, the Federal Deposit Insurance Corporation shall not be required to post bond, and it shall have as receiver all those powers afforded under federal law.

D. The Commissioner may issue and serve upon an association an order to cease and desist from an unsafe or unsound practice or a violation if, in the opinion of the Commissioner, an association (i) is engaging or has engaged, or there is reasonable cause to believe is about to engage, in an unsafe or unsound practice in conducting the business of the association; or (ii) is violating or has violated, or there is reasonable cause to believe is about to violate, this chapter or any other applicable law, regulation, or order. An order to cease and desist shall contain a statement of the facts constituting the alleged violation or unsafe or unsound practice, and it may require, in terms that may be mandatory or otherwise, an association, its directors, officers, employees, or agents to cease and desist from such violation or practice. The order shall specify the effective date thereof and shall contain a notice to the association of its right to request a hearing on the order in accordance with the Commission's Rules.

E. When the unsafe or unsound practice or the violation specified in an order to cease and desist, or any continuation thereof, is likely to prejudice the interests of the account holders or the stockholders of an association, the Commissioner may issue his order effective immediately. An order to cease and desist shall remain in effect until it is withdrawn by the Commissioner or is terminated by the Commission after a hearing on the matter. A request for hearing under this section shall be given expeditious treatment on the docket of the Commission, and the Commission need not allow for 10 days' notice to the parties.

Code 1950, § 6-201.60; 1960, c. 402; 1966, c. 584, § 6.1-190; 1972, c. 796, § 6.1-195.70; 1983, c. 506; 1985, c. 425, § 6.1-194.83; 1990, c. 3; 2010, c. 794.

§ 6.2-1200. Removal of director or officer; appeal; penalty for acting after removal.

A. Whenever any director or officer of a savings institution doing business in the Commonwealth has knowingly continued to violate any law relating to such savings institution or has knowingly continued any unsafe or unsound practice in conducting the business of such institution, after the director or officer, and the board of directors of the institution of which he is a director or officer, have been warned in writing by the Commissioner to discontinue such violation of law or such unsafe or unsound practice, the Commissioner shall certify the facts to the Commission. The Commission shall thereupon enter an order requiring such director or officer to appear before the Commission, within not less than 10 days, to show cause why he should not be removed from office and thereafter restrained from participating in any manner in the management of such savings institution. Such order shall contain a brief statement of the facts certified to the Commission by the Commissioner. A copy of the order shall be served upon the director or officer, and a copy thereof shall be sent by certified or registered mail to each director of the savings institution affected.

B. If, after granting the accused director or officer a reasonable opportunity to be heard, the Commission finds that he has knowingly continued to violate any law relating to the savings institution, or has knowingly continued any unsafe or unsound practice in conducting the business of the institution, after he and the board of directors of the institution of which he is a director or officer have been warned in writing by the Commissioner to discontinue such violation of law or unsafe or unsound practice, the Commission shall enter an order removing the director or officer from office and restraining the director or officer from thereafter participating in any manner in the management of such savings institution. A copy of such order shall be served upon the director or officer and upon the savings institution of which he is a director or officer, whereupon the director or officer shall cease to be a director or officer of the institution and shall thereafter cease to participate in any manner in the management of the institution.

C. Any director or officer removed and restrained under the provisions of this section who thereafter participates in any manner in the management of such savings institution, except as a stockholder therein, is guilty of a Class 6 felony.

1985, c. 425, § 6.1-194.84; 2010, c. 794.

§ 6.2-1201. Special examinations.

When (i) written application is made to the Commission by the board of directors or by the stockholders representing two-fifths of the total outstanding capital stock of any savings institution incorporated under the laws of and doing business in the Commonwealth, or (ii) in the judgment of the Commission it may be necessary for the protection of the public or of persons depositing or dealing with such savings institution, the Commission shall cause to be made a special examination of such savings institution. All expenses incident to such special examination may be charged to the savings institution so examined and shall be paid by the savings institution so charged.

1990, c. 247, § 6.1-194.84:1; 2010, c. 794.

§ 6.2-1202. Fees for supervision and regulation; investigations.

A. For the purpose of defraying the expenses of supervision and regulation of state savings institutions and foreign savings institutions doing business in the Commonwealth, the Commission shall, on or before July 1 of each year, assess against every such savings institution fees in accordance with a schedule to be set by the Commission. Such schedule shall bear a reasonable relationship to the total assets of various individual savings institutions and to the costs of their respective supervision, regulation, and examination.

B. All fees so assessed shall be paid into the state treasury on or before July 31 following. The Commission shall mail the assessments to each association on or before July 1 of each year.

C. The Commission shall charge a fee:

1. Of $1,800 for investigating an application for authority to establish a branch, if the branch is to be located within the Commonwealth;

2. As prescribed by the Commission for investigating an application for authority to establish a branch if the branch is to be located outside the Commonwealth;

3. Of $1,000 for investigating an application for authority to change the location of an existing main office or branch office;

4. Of $10,000 for investigating an application for a certificate of authority in the case of a state association;

5. As prescribed by the Commission for investigating an application for a certificate of authority in the case of a foreign savings institution;

6. Of $7,500 for investigating an application for merger or consolidation;

7. Of $2,000 for investigating an application for authority to exercise trust powers if such powers are to be exercised through a trust department;

8. Of $10,000 for investigating an application for authority to exercise trust powers if such powers are to be exercised through a trust affiliate or subsidiary;

9. Of $5,000 for investigating an application to convert from a state association to a state savings bank pursuant to subsection B of § 6.2-1143 or from a state bank to a state savings bank pursuant to § 6.2-829; and

10. Of $10,000 for investigating an application for a conversion other than a conversion from a state association or state bank to a state savings bank as provided in subdivision 9.

D. The Commission shall not be entitled to any fees other than as provided in subdivision C 6 for investigating any application to retain existing branches of the applying savings institution as branches of the merged or consolidated institutions. The fee prescribed in subdivision C 6 may be waived by the Commission in the case of supervisory mergers or consolidations made pursuant to § 6.2-1205.

E. Notwithstanding the designation of the several fees set forth in subsection C, the Commission may reduce by regulation or order any such fee or fees, if the Commission concludes that there is a reasonable basis for doing so and that the reduction of the fee will not be detrimental to the effectiveness of the Bureau.

Code 1950, § 6-201.55; 1960, c. 402; 1966, c. 584, § 6.1-185; 1972, c. 796, § 6.1-195.65; 1974, c. 181; 1976, c. 658; 1982, c. 455; 1984, c. 344; 1985, c. 425, § 6.1-194.85; 1986, c. 122; 1987, c. 172; 1988, c. 5; 1991, c. 230, § 6.1-194.149; 1992, c. 283; 1994, c. 331; 1998, c. 19; 2010, c. 794.

§ 6.2-1203. Examination of persons believed to be doing business without authority; doing business without authority; penalty.

A. The Commissioner shall examine the accounts, books, and papers of any person or entity that he has reason to believe is doing the business of a savings institution in the Commonwealth without legal authority to do so. Any person having possession, custody, or control of such accounts, books, and papers refusing to produce such documents for examination by the Commissioner is guilty of a Class 1 misdemeanor.

B. Every person who does the business of a savings institution in the Commonwealth without authority, and every officer and agent of a corporation doing such business without authority who knowingly participates therein, is guilty of a Class 6 felony.

Code 1950, §§ 6-201.50, 6-201.51; 1960, c. 402; 1966, c. 584, §§ 6.1-180, 6.1-181; 1972, c. 796, §§ 6.1-195.60, 6.1-195.61; 1985, c. 425, § 6.1-194.86; 1992, c. 136; 2010, c. 794.

§ 6.2-1204. Compliance by savings institution holding companies with federal regulations constitutes compliance with Commission regulations.

Any savings institution holding company that does not have any subsidiaries that are state savings institutions and that is subject to regulations adopted by the appropriate federal authority shall be deemed to be in substantial compliance with the regulations adopted by the Commission if it is in compliance with the regulations adopted by the appropriate federal authority.

1985, c. 425, § 6.1-194.87; 1990, c. 3; 1996, c. 16; 2010, c. 794.

§ 6.2-1205. Merger, consolidation or transfer of assets of insolvent or financially unstable savings institution; notice and hearing; final order; priorities; examinations of resulting institutions.

A. As used in this section:

"Bank" or "savings institution" means institutions incorporated or established under the laws of (i) the Commonwealth, (ii) the United States, or (iii) any other state, which institutions' deposits are insured as required by this title for the issuance of a certificate of authority to do business.

"Insolvent" means that the current book value of liabilities is in excess of the current book value of assets.

B. If the Commission finds that (i) a state savings institution is insolvent, or, in its opinion, the financial stability of a state savings institution is threatened, (ii) the merger or consolidation of such state savings institution into another savings institution or into a bank is desirable for the protection of the stockholders, members or depositors of such association, and that such merger or consolidation is in the public interest, and (iii) an emergency exists, and if the board of directors of such state savings institution approves a plan of merger or consolidation of such savings institution into another savings institution or bank, compliance with the requirements of § 13.1-718 or 13.1-895 shall be dispensed with as to such state savings institution. In such event, the approval by the Commission of such plan of merger or consolidation shall be the equivalent of approval by the holders of more than two-thirds of the outstanding shares of such state savings institution for all purposes of Article 12 (§ 13.1-715.1 et seq.) of Chapter 9 of Title 13.1 or the approval of two-thirds of the members for all purposes of Article 11 (§ 13.1-893.1 et seq.) of Chapter 10 of Title 13.1.

C. If the Commission finds that (i) a state savings institution is insolvent, or in its opinion, the financial stability of a state savings institution is threatened, (ii) the acquisition of the assets and liabilities of such savings institution by another savings institution or by a bank is in the best interests of the stockholders, members or depositors of such state savings institution, and that such acquisition of the assets and liabilities is in the public interest, and (iii) an emergency exists, it may, with the consent of the board of directors of both institutions as to the terms and conditions of such transfer, including the assumption of all or certain liabilities, enter an order transferring some or all of the assets and liabilities of such state savings institution to such other savings institution or bank. In such event, compliance with the provisions of § 13.1-723, 13.1-724, 13.1-899, or 13.1-900 shall not be required, and § 13.1-730 shall not be applicable to such transfer.

D. In the case either of such a merger, consolidation or a transfer of assets and liabilities, the Commission shall provide that prompt notice of its findings, and plan of merger, consolidation or transfer of assets and liabilities, be sent to the stockholders or members of record of such insolvent savings institution or savings institution threatened with financial instability for the purpose of providing such shareholders or members an opportunity to challenge the findings of the Commission and the plan of merger, consolidation or transfer of assets and liabilities. The relevant books and records of such state savings institution shall remain intact and be made available to such shareholders or members for a period of 30 days after such notice is sent. The Commission's findings and plan of merger, consolidation or transfer of assets and liabilities shall become final if a hearing before the Commission is not requested by any such shareholder or member in a written request delivered to the Commission within 15 days after the notice specified by this section is sent. Any such request for a hearing shall contain a statement of the specific grounds for such shareholder's or member's challenge to the Commissioner's findings and plan of merger, or consolidation or transfer of assets and liabilities.

E. If, after a hearing as provided in subsection D, the Commission finds that good cause has been shown for the reversal or modification of its initial findings, or for rescission or modification of its initial plan for merger, consolidation or transfer of assets and liabilities, the Commission shall enter its final order accordingly. If, after such hearing, the Commission affirms its original findings and plan for merger, or consolidation or transfer of assets and liabilities, its order shall be final.

F. Notwithstanding any other provision of law, any institution resulting from a merger, consolidation or a transfer of assets and liabilities under the provisions of this section shall have the right to retain and operate all offices of the institution so merged, consolidated or acquired that were in operation at the time of such merger, or consolidation or acquisition. This section shall not be construed to allow the establishment of additional branches by any institution resulting from such merger, consolidation or transfer than would otherwise be allowed by the laws of the Commonwealth.

G. The Commission shall authorize transactions under this section in the following order of priority:

1. Between financial institutions of the same type located within the Commonwealth;

2. Between financial institutions of different types located within the Commonwealth;

3. Between financial institutions of the same type including depository institutions located outside the Commonwealth; and

4. Between financial institutions of different types including depository institutions located outside the Commonwealth.

H. In considering transactions involving financial institutions located outside the Commonwealth, the Commission shall give priority to plans of merger, consolidation or asset acquisition involving financial institutions located in states adjoining the Commonwealth or located in the District of Columbia.

I. Any institution resulting from a transaction authorized by this section whose main office is located outside of the Commonwealth shall, as a condition of being able to do business in the Commonwealth, allow the Commission to examine such institution from time to time as the Commission deems necessary. In conducting such examinations, the Commission shall have all of the powers provided by this title relating to the examination of financial institutions.

J. The provisions of Article 5 (§ 6.2-1148 et seq.) of this chapter shall not apply to mergers, consolidations, and acquisitions authorized by the provisions of this section.

1983, c. 450, § 6.1-195.70:2; 1985, c. 425, § 6.1-194.88; 1991, c. 230, § 6.1-194.150; 1994, c. 353; 2005, c. 765; 2010, c. 794.

Chapter 13 - CREDIT UNIONS

Article 1 - General Provisions

§ 6.2-1300. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Capital" means the sum of share accounts, reserves, and undivided earnings of a credit union.

"Corporate credit union" means a credit union whose field of membership consists primarily of other credit unions.

"Credit union" means a cooperative, nonprofit corporation organized under the laws of the Commonwealth and authorized to do business under this chapter for the purposes of encouraging thrift among its members, creating a source of credit at fair and reasonable rates of interest, providing an opportunity for its members to use and control their own money on a democratic basis in order to improve their economic and social condition, and conducting any other business, engaging in any other activity, and providing any other service that may be of benefit to its members, consistent with the provisions of this chapter and any regulations adopted by the Commission under this chapter.

"Credit union service organization" means any organization, corporation, or association, if (i) the membership or ownership, as the case may be, of such organization, corporation, or association is primarily confined or restricted to credit unions or organizations of credit unions and (ii) the purpose for which such organization, corporation, or association is organized is to strengthen or advance the development of credit unions or credit union organizations.

"Household" means those individuals who are related by blood, marriage, or other recognized family relationship and who live in the same house or other place of residence.

"Immediate family" means the individuals in a household who are related by blood, marriage, or other recognized family relationship. "Immediate family" also includes, regardless of their place of residence, the children, grandchildren, grandparents, parents, siblings, and spouse of an individual.

"Insuring organization" means an organization that provides aid and financial assistance to credit unions that are in the process of liquidation or are incurring financial difficulty in order that the share accounts in the credit unions shall be protected or guaranteed against loss up to a specified limit for each account, such as the National Credit Union Administration Share Insurance Fund, a corporation organized under Article 5 (§ 6.2-1331 et seq.), or any other share insurance provider approved by the Commission.

"Member," with respect to a credit union, or "credit union member," means any person holding a share account in accordance with standards specified by the credit union. "Member" may also be used to refer to an individual or other entity that is included within a group or a community, or to an individual who is part of a household or family.

"Reserves" means the total of allowances for loan losses, regular, special, and any other type of funds held in reserve.

"Retained earnings" means undivided earnings, regular reserve, reserve for contingencies, supplemental reserves, reserves for losses, and other appropriations from undivided earnings as designated by management or the Bureau.

"Share account" means a balance held by a credit union and established by a member in accordance with standards specified by the credit union, including balances designated as shares, share certificates, share draft accounts, or other names.

"Shares" means the interest of a member having an account in a credit union.

1990, c. 373, § 6.1-225.2; 1999, c. 63; 2010, c. 794; 2013, cc. 16, 92.

§ 6.2-1301. Effect of ownership of a share account.

Ownership of a share account confers membership and voting rights as set forth in the credit union bylaws and represents an interest in the capital of the credit union upon dissolution or conversion to another type of institution.

1990, c. 373, § 6.1-225.2; 1999, c. 63; 2010, c. 794; 2022, cc. 675, 676.

§ 6.2-1302. Powers.

In addition to the powers specified or implied elsewhere in this chapter or in the laws of the Commonwealth, a credit union shall have the power to:

1. Enter into contracts;

2. Sue and be sued;

3. Adopt, use, and display a corporate seal;

4. Receive savings from and make loans and extend lines of credit to its members;

5. Individually or jointly with other credit unions acquire, lease as lessor or lessee, hold, assign, pledge, exchange, repair, mortgage, hypothecate, sell, discount, or otherwise dispose of property or assets, either in whole or in part, as necessary or incidental to its operations, including any property or assets obtained as a result of defaults under obligations owing to it;

6. Borrow from any source, provided that (i) a credit union shall notify and obtain prior approval of the Commissioner if the total borrowings will exceed 50 percent of the credit union's outstanding shares and (ii) in no event shall the borrowings exceed 90 percent of the credit union's outstanding shares;

7. Sell all or substantially all of its assets or purchase all or substantially all of the assets of another credit union, subject to the approval of the Commission;

8. Offer related financial services, including electronic fund transfers, share draft accounts, safe deposit boxes, leasing of tangible personal property to its members, and correspondent arrangements with other financial institutions;

9. Hold membership in other credit unions organized under this chapter or other applicable law, and in associations and organizations controlled by or fostering the interest of credit unions, including a central liquidity facility organized under state or federal law;

10. Contract with any licensed insurance company or society to insure the lives of its members to the extent of their loans and share accounts, in whole or in part, and to pay all or a portion of the premium therefor;

11. Engage in activities or programs as requested by any governmental authority, subject to the approval of the Commissioner;

12. Invest its funds, operate a business, manage or deal in property when such actions are reasonably necessary to avoid loss on a loan or investment previously made or an obligation previously created in good faith. Such property or business shall not be held or operated by the credit union for a period longer than is reasonably required to protect the interest of the credit union, unless specifically authorized by the Commissioner;

13. Make contributions to any nonprofit civic, charitable, or service organizations;

14. Make loans to its members and to other credit unions;

15. Engage in virtual currency custody services in the manner and to the extent provided in § 6.2-1302.1;

16. Engage in any additional activity, service, or other practice that is authorized for a federally chartered credit union and that has not otherwise been authorized for a state-chartered credit union by the provisions of this chapter or by Commission regulation, including regulations adopted pursuant to subsection B of § 6.2-1303, provided that (i) at least 45 calendar days prior to engaging in any such activity, service, or practice the credit union provides the Commissioner with written notice along with any additional information relating to the activity, service, or practice that the Commissioner may require and (ii) the credit union engages in the activity, service, or practice subject to the same terms, conditions, and limitations that are applicable to a federally chartered credit union. The Commissioner may at any time, based upon supervisory, legal, or safety and soundness considerations, prohibit or further restrict the activity, service, or practice. "Activity, service, or other practice" does not include credit union field of membership or field of membership expansion under §§ 6.2-1327 and 6.2-1328 and any related regulations; and

17. Undertake such other activities relating to the purposes of the credit union as its charter or bylaws may authorize, provided such activities are not inconsistent with this chapter.

Code 1950, § 6-209; 1966, c. 584, § 6.1-200; 1968, c. 560; 1987, c. 622, § 6.1-330.64; 1990, c. 373, § 6.1-225.21; 2006, c. 753; 2010, c. 794; 2022, cc. 606, 607; 2023, c. 303.

§ 6.2-1302.1. Virtual currency custody services.

A. As used in this section:

"Custody services" means the role of a credit union in the safekeeping and custody of various customer assets.

"Virtual currency" has the same meaning as provided in § 6.2-818.1.

B. A credit union may provide its customers with virtual currency custody services so long as the credit union has adequate protocols in place to effectively manage risks and comply with applicable laws and, prior to offering virtual currency custody services, the credit union has carefully examined the risks in offering such services through a methodical self-assessment process. If a credit union engages in virtual currency custody services, the credit union shall:

1. Implement effective risk management systems and controls to measure, monitor, and control relevant risks associated with custody of digital assets such as virtual currency;

2. Confirm that it has adequate insurance coverage for such services; and

3. Maintain a service provider oversight program, to the extent that the credit union engages with a service provider to provide virtual currency custody services, to address risks to service provider relationships as a result of engaging in virtual currency custody services.

C. A credit union may provide virtual currency custody services in a fiduciary or nonfiduciary capacity. In providing such services in a nonfiduciary capacity, the credit union shall act as a bailee, taking possession of the customer's asset for safekeeping while legal title remains with the customer, such that the customer retains direct control over the keys associated with his virtual currency. To provide such services in a fiduciary capacity, the credit union shall obtain approval from the Commission as required by subsection D. In providing virtual currency custody services in a fiduciary capacity, the credit union shall receive control of the customer's virtual currency, and new private keys shall be created to be held by the credit union. If approved by the Commission to provide virtual currency custody services in a fiduciary capacity, a credit union shall have authority to manage virtual currency assets as it would any other type of asset held in such capacity.

D. No credit union shall provide virtual currency custody services in a fiduciary capacity without first obtaining authorization to do so from the Commission. The Commission shall not grant such authority until it finds that the credit union has satisfied the following requirements:

1. The credit union's capital structure is sufficiently strong to support the undertaking to provide virtual currency custody services;

2. The personnel who will direct the proposed virtual currency custody services have adequate experience, training, and sufficient resources to ensure compliance with laws and regulations and to protect the operations of the credit union; and

3. Granting such authority to the credit union is in the public interest.

E. The Commission may impose conditions on the authority granted to any credit union pursuant to subsection D and may suspend or revoke such authority if it finds that the credit union has failed to comply with any laws or regulations applicable to virtual currency custody services or any existing conditions imposed by the Commission or if the services are otherwise being provided in an unsafe or unsound manner.

2023, c. 303.

§ 6.2-1303. Regulations.

A. The Commission may adopt regulations to implement the provisions of this chapter.

B. In addition to the powers specifically granted to state chartered credit unions by the provisions of this chapter, the Commission may adopt such regulations as may be necessary to permit state chartered credit unions to have powers at least comparable with those of federally chartered credit unions or to effect the purposes of this chapter, regardless of any then existing statute, regulation or court decision limiting or denying such powers to state chartered credit unions. The requirement of a public hearing shall not automatically apply to regulations adopted under this subsection, but the Commission may hold such hearings as it deems appropriate.

C. Before adopting any regulation under this chapter, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to present evidence and be heard, in accordance with the Commission's Rules.

1975, c. 34, § 6.1-200.2; 1988, c. 309; 1990, c. 373, §§ 6.1-225.3, 6.1-225.22; 1997, c. 111, § 6.1-225.3:1; 2010, c. 794.

§ 6.2-1304. Franchise tax exemption.

All credit unions organized under the laws of the Commonwealth and doing business purely as credit unions shall be exempt from the payment of any franchise tax.

Code 1950, § 6-233; 1966, c. 584, § 6.1-225; 1990, c. 373, § 6.1-225.63; 2010, c. 794.

§ 6.2-1305. Making or circulating derogatory statements affecting credit unions; penalty.

Any person who willfully and maliciously makes, circulates, or transmits to another any statement or rumor that is untrue in facts and is directly or by inference derogatory to the financial condition or affects the solvency or financial standing of any credit union doing business in the Commonwealth, or who knowingly counsels, aids, procures, or induces another to start, transmit, or circulate any such statement or rumor, is guilty of a Class 3 misdemeanor.

1991, c. 170, § 6.1-225.64; 2010, c. 794.

§ 6.2-1306. Unlawful use of words "credit union.".

A. It shall be unlawful for any person, other than (i) a credit union organized under the provisions of this chapter, (ii) any entity authorized by any federal law, or (iii) any association or corporation the owners, members or constituents of which consist exclusively of authorized state and federal credit unions or members of authorized state and federal credit unions, to use any name or title which contains the words "credit union."

B. Any person violating the provisions of this section is guilty of a Class 1 misdemeanor and may be enjoined by any court having equity jurisdiction over the unauthorized user.

Code 1950, § 6-203; 1966, c. 584, § 6.1-224; 1990, c. 373, § 6.1-225.19; 1994, c. 13; 2010, c. 794.

§ 6.2-1307. Use of credit union name, logo, or symbol for marketing purposes; penalty.

A. Except as provided in subsection B, no person shall use the name, logo, or symbol, or any combination thereof, of a credit union, or any name, logo, or symbol, or any combination thereof, that is deceptively similar to the name, logo, or symbol of a credit union, in marketing material provided to or solicitation of another person in a manner such that a reasonable person may believe that the marketing material or solicitation originated from or is endorsed by the credit union or that the credit union is responsible for the marketing material or solicitation.

B. This section shall not apply to (i) an affiliate or agent of the credit union or (ii) a person who uses the name, logo, or symbol of a credit union with the consent of the credit union.

C. Any person violating the provisions of this section, either individually or as an interested party, is guilty of a Class 1 misdemeanor.

D. This section shall not affect the availability of any remedies otherwise available to a credit union.

2005, c. 240, § 6.1-225.65; 2010, c. 794.

Article 2 - SUPERVISION AND REGULATION

§ 6.2-1308. Supervision and regulation by Commission.

Credit unions organized under the provisions of this chapter shall be subject to the supervision and regulation of the Commission.

1990, c. 373, § 6.1-225.3; 2010, c. 794.

§ 6.2-1309. Examinations.

A. Each credit union shall be examined as often as the Commission deems that an examination is in the interest of its members, provided that an examination shall be conducted at least twice in every three-year period. The examiners shall be given free access to all books, papers, securities, and other sources of information in respect to the credit union. For the purpose of making an examination, the Commission may subpoena and examine personally witnesses under oath, whether such witnesses are members of the credit union or not, and may require the production of any documents, whether such documents are documents of the credit union or not.

B. All expenses incident to any special examination which may be necessary shall be paid by the credit union so examined.

Code 1950, § 6-230; 1956, c. 176; 1966, c. 584, § 6.1-221; 1976, c. 658; 1981, c. 521; 1990, c. 373, § 6.1-225.4; 2010, c. 794.

§ 6.2-1310. Fees for examination, supervision, and regulation.

In order to defray the costs of an examination pursuant to § 6.2-1309 and of supervision and regulation by the Commission, every credit union shall pay an annual fee, to be calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the total assets of various individual credit unions, to the actual cost of their respective examinations, and to other factors relating to their supervision and regulation. Fees shall be assessed pursuant to this section on or before March 1 each year. All fees so assessed shall be paid by the credit union to the state treasury on or before March 31 following the assessment.

1981, c. 521, § 6.1-221.1; 1990, c. 373, § 6.1-225.5; 2010, c. 794.

§ 6.2-1311. Reports to Commission; penalty for failure to make reports.

A. No later than March 31 of each year, each credit union shall report to the Commission regarding its condition as of the close of business on the preceding December 31. These reports shall be signed by the president or the chairman and the treasurer or secretary, or by the majority of the members of the supervisory committee. A credit union shall make such other reports as the Commissioner shall at any time demand.

B. The Commission may allow a credit union to make the reports required by this section electronically, in accordance with procedures established by the Commission. A credit union that submits a report electronically shall maintain a copy of the report with the required certified signatures affixed.

C. If any credit union (i) neglects or refuses to make its reports as provided in this chapter for more than 15 days or (ii) fails to pay such charges as are required under this chapter, including any charges for delay in filing reports, the Commission may impose a civil penalty not exceeding $100 per day upon the credit union, to a maximum of $5,000, or the Commission may give notice to such credit union of its intention to revoke the certificate of authority of the credit union for such neglect or failure. If such neglect or failure continues for 15 days after such notice, then the Commission may revoke or suspend the certificate of authority of the credit union. In such event, the Commission may, in its discretion, (a) close such credit union and take possession of its property and business until such time as it may see fit to allow the credit union to resume business or (b) proceed to finally liquidate such business.

Code 1950, §§ 6-229, 6-231; 1956, c. 90; 1964, c. 75; 1966, c. 584, §§ 6.1-220, 6.1-222; 1976, c. 658; 1990, c. 373, § 6.1-225.6; 1998, c. 34; 2010, c. 794.

§ 6.2-1312. Cease and desist orders; right to hearing.

A. The Commission may issue and serve upon a credit union an order to cease and desist from one or more unsafe or unsound practices or violations if, in the opinion of the Commission, a credit union (i) is engaging or has engaged, or there is reasonable cause to believe is about to engage, in an unsafe or unsound practice; or (ii) is violating or has violated, or there is reasonable cause to believe is about to violate, this chapter or any other applicable law, regulation, or order. An order to cease and desist shall contain a statement of the facts constituting the alleged violations or unsafe or unsound practices, and the order may require, in terms that may be mandatory or otherwise, a credit union, its officers, directors, employees, or agents to cease and desist from such practices or violations. The order shall specify the effective date thereof and shall contain a notice to the credit union of its right to a hearing on such order in accordance with the Commission's Rules.

B. If an unsafe or unsound practice or violation specified in the order to cease and desist, or any continuation thereof, is likely to prejudice the interest of the members of the credit union, the Commission may issue an order effective immediately. An order to cease and desist shall remain in effect until it is withdrawn or terminated by the Commission after a hearing on the matter. A request for hearing under this section shall be given expeditious treatment on the docket of the Commission, and the Commission need not allow for 10 days' notice to the parties.

1990, c. 373, § 6.1-225.7; 2010, c. 794.

§ 6.2-1313. Powers of Commission in case of nonobservance of law, noncompliance with orders, insufficient reserves, or approaching insolvency; appointment of receiver.

A. If the Commission finds that (i) a credit union is in violation of a law or regulation applicable to it, (ii) a credit union is being operated in an unsafe or unsound manner, (iii) a credit union has failed to comply with a lawful order of the Commissioner, (iv) the reserve of the credit union fails to meet the requirements set forth in § 6.2-1377, or (v) a credit union is, or is about to become, insolvent, it shall give immediate notice of its finding to the officers and directors of the credit union. If necessary to conserve the assets of the credit union or protect the interests of the members of the credit union, the Commission may, after reasonable notice to the credit union and an opportunity for it to be heard, do any one or more of the following:

1. Close the credit union for a period not exceeding 60 days, which period may be extended for additional like periods as the Commission may deem necessary;

2. Require the officers and directors of the credit union to liquidate outstanding loans;

3. Require that all lawful orders of the Commission be complied with;

4. Require the credit union to make reports daily or otherwise as to the results achieved in carrying out its orders;

5. Temporarily suspend the right of such credit union to receive any further investment in its share accounts;

6. Grant the right to suspend or limit withdrawals against share accounts for such period as the Commission may deem necessary; and

7. Appoint a conservator to take charge of the credit union and operate it pending further action by the Commission.

B. If the Commission determines that (i) a credit union is approaching insolvency and no reasonable prospect for rehabilitation of the credit union exists, (ii) the Commission deems it necessary with respect to any credit union for the protection of the public interest, or (iii) a credit union has a net worth ratio of less than two percent, the Commission may close the doors of the credit union without any notice, take charge of the books, assets, and affairs of the credit union, and apply to the Circuit Court of the City of Richmond for the appointment of a receiver to take charge of the credit union's business and assets. In the case of a federally insured credit union, the court shall appoint the National Credit Union Administration Board as receiver if it finds that the National Credit Union Administration Board is willing to accept the appointment. In the case of a credit union that is not federally insured, the court shall appoint a receiver if it finds that to do so will be in the public interest.

C. As used in this article, "insolvent" or "insolvency" means that (i) a credit union is incapable of meeting the current demands of creditors or (ii) the current value of a credit union's assets is less than the current value of the sum of its share accounts and liabilities.

1975, c. 34, § 6.1-200.2; 1988, c. 309; 1990, c. 373, § 6.1-225.8; 2010, c. 794; 2018, c. 257.

§ 6.2-1314. Penalties for violation of orders of Commission.

The Commission may impose a civil penalty not exceeding $10,000 upon any credit union or against any of its directors, officers, or employees for knowingly or willfully violating any lawful order of the Commission.

1976, c. 658, § 6.1-223.1; 1990, c. 373, § 6.1-225.9; 2010, c. 794.

§ 6.2-1315. Removal of director or officer; penalty for acting after removal.

A. Whenever any director or officer of a credit union doing business in the Commonwealth violates any lawful order of the Commission or knowingly continues to violate any law relating to credit unions or knowingly continues an unsafe or unsound practice in conducting the business of a credit union, after the director or officer, and the board of directors of the institution of which he is a director or officer, have been warned in writing by the Commissioner to discontinue such violation of law or such unsafe or unsound practice, the Commissioner shall certify the facts to the Commission. The Commission shall thereupon enter an order requiring such director or officer to appear before the Commission, within not less than 10 days, to show cause why he should not be removed from office and thereafter restrained from participating in any manner in the management of the credit union. The order shall contain a brief statement of the facts certified to the Commission by the Commissioner. A copy of the order shall be served upon the director or officer, and a copy thereof shall be sent by certified or registered mail to each director of the credit union affected.

B. If, after granting the accused director or officer a reasonable opportunity to be heard, the Commission finds that he has knowingly continued to violate any law relating to the credit union, or has knowingly continued any unsafe or unsound practice in conducting the business of the credit union, after he and the board of directors of the credit union of which he is a director or officer have been warned in writing by the Commissioner to discontinue such violation of law or unsafe or unsound practice, the Commission shall enter an order removing the director or officer from office and restraining the director or officer from thereafter participating in any manner in the management of the credit union. A copy of such order shall be served upon the director or officer and upon the credit union of which he is a director or officer, whereupon the director or officer shall cease to be a director or officer of the credit union and shall thereafter cease to participate in any manner in the management of the credit union.

C. Any director or officer removed and restrained under the provisions of this section who thereafter participates in any manner in the management of the credit union, except as a member thereof, is guilty of a Class 6 felony.

1976, c. 658, § 6.1-223.1; 1990, c. 373, § 6.1-225.9; 2010, c. 794.

§ 6.2-1316. Offenses; penalty.

Any officer, director, employee, receiver, or agent of a credit union who willfully does any of the following is guilty of a Class 6 felony:

1. With the intent to deceive, falsifies any book of account, report, statement, record, or other document of a credit union, whether by alteration, false entry, omission, or otherwise;

2. Signs, issues, publishes, or transmits to a government agency any book of account, report, statement, record, or other document that he knows to be false;

3. By means of deceit, obtains a signature to a writing that is a subject of forgery;

4. With intent to deceive, destroys any credit union book of account, report, statement, record, or other document; or

5. With the intent to defraud, shares or receives directly or indirectly any money, property, or benefits through any transaction of the credit union.

1985, c. 363, § 6.1-223.2; 1990, c. 373, § 6.1-225.62; 2010, c. 794.

§ 6.2-1317. Supervisory merger or transfer of assets of insolvent or financially unstable credit union.

A. If the Commission finds that (i) a state credit union is insolvent or financially unstable and (ii) its merger into another credit union is desirable for the protection of its members, and if the board of directors of both credit unions approves a plan of merging such state credit union into another state credit union or a federal credit union, compliance with § 13.1-895 shall be dispensed with as to both credit unions and the approval of the Commission of such plan of merger shall be the equivalent of approval by more than two-thirds of the members of both credit unions for all purposes of Article 11 (§ 13.1-893.1 et seq.) and Article 12 (§ 13.1-899 et seq.) of Chapter 10 of Title 13.1.

B. If the Commission finds that (i) a state credit union is insolvent or financially unstable and (ii) the acquisition of its assets by another state credit union or a federal credit union is in the best interests of its members, it may, with the consent of the board of directors of both credit unions as to the terms and conditions of such transfer, including the assumption of all or certain liabilities, enter an order transferring some or all of the assets of such state credit union to such other state or federal credit union and compliance with the provisions of §§ 13.1-899 and 13.1-900 shall not be required.

C. In the case either of such a merger or of such a sale of assets, the Commission shall require that prompt notice of its findings of insolvency or financial instability and of the merger or sale of assets be sent to the members of record of the insolvent or financially unstable state credit union for the purpose of providing such members an opportunity to challenge the finding that the state credit union is insolvent or financially unstable. The relevant books and records of such credit union shall be preserved and be made available to such members for a period of 30 days after such notice is sent. The Commission's finding of insolvency or financial instability shall become final if a hearing before the Commission is not requested by any such member within such 30-day period.

D. If, after such hearing provided in subsection C, the Commission finds that the state credit union is solvent and financially stable, it shall rescind its order entered pursuant to subsection A or subsection B and the merger or transfer of assets shall be rescinded. After such hearing, however, if the Commission finds that the state credit union is insolvent or financially unstable, its order shall be final.

E. Notwithstanding the provisions of subsection B of § 6.2-1327, or any other provisions of this chapter, the Commission may order a merger pursuant to subsection A or a sale of assets pursuant to subsection B. The continuing credit union, upon approval of the Commission, shall amend its bylaws to incorporate the specified common bond of interest of the insolvent or financially unstable credit union.

F. The Commission may authorize a financial institution whose deposits are insured by a federal agency to purchase any of the assets of or assume any of the liabilities of a credit union that is insolvent or financially unstable, provided that prior to exercising this authority the Commission shall use every reasonable effort to effect a merger or consolidation with or purchase and assumption by another credit union and shall have been advised by the insuring organization that it cannot effect a merger, consolidation, or other disposition of the insolvent or financially unstable credit union acceptable to the Commission.

1982, c. 571, § 6.1-200.4; 1985, c. 364; 1990, c. 373, § 6.1-225.10; 2010, c. 794; 2021, Sp. Sess. I, c. 143.

§ 6.2-1318. Repealed.

Repealed by Acts 2021, Sp. Sess. I, c. 143, cl. 2, effective July 1, 2021.

§ 6.2-1319. Involuntary dissolution.

If the Commission determines that a credit union is violating any provisions of this chapter, it may, after a hearing or an opportunity for a hearing has been given to the credit union, direct that it discontinue the illegal methods or practices described in the order. If any credit union is insolvent, or has failed or refused to comply with the provisions of this chapter, the Commission may take possession of the business and property of the credit union and retain such possession until such time as it may permit such credit union to resume business, or until its affairs are finally liquidated under order of the Commission. Alternatively, the Commission may apply to any court in the Commonwealth having jurisdiction to appoint receivers for the appointment of a receiver to take charge of the business and assets and to wind up the affairs and business of any such credit union. The receiver when appointed shall become and be assignee of the assets of such credit union.

Code 1950, § 6-232; 1950, c. 93; 1966, c. 584, § 6.1-223; 1990, c. 373, § 6.1-225.12; 2010, c. 794.

Article 3 - FORMATION OF CREDIT UNION

§ 6.2-1320. Incorporation.

A. Five or more residents of the Commonwealth who are of legal age and share a common bond referred to in subsection B of § 6.2-1327 may establish, pursuant to the provisions of the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.), a corporation for the purpose of conducting business as a credit union as provided in this chapter. Every corporation organized under this chapter shall include in the corporate name the words "credit union" as well as some other distinguishing word or words.

B. Credit unions incorporated pursuant to this chapter shall be subject to the provisions of the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.), except as may otherwise be provided in this chapter.

Code 1950, § 6-204; 1956, c. 433; 1958, c. 139; 1966, c. 584, § 6.1-196; 1968, c. 560; 1990, c. 373, § 6.1-225.13; 2010, c. 794.

§ 6.2-1321. Certificate of authority.

A. Before it begins to do any business, an organizing credit union shall apply for and obtain from the Commission a certificate of authority. An application, accompanied by a fee of $300, shall be made on a form prescribed by the Commission. The Commission shall issue such a certificate if it finds that:

1. The credit union has been formed for no purpose other than the conduct of a legitimate credit union business;

2. The moral fitness, financial responsibility, and other qualifications of the proposed officers and directors are such as to command the confidence of the members;

3. The field of membership of the proposed credit union complies with § 6.2-1327, and all other applicable provisions of law have been complied with;

4. Share accounts in the credit union will be insured by an approved insuring organization; and

5. Establishment of the proposed credit union is economically advisable. In reaching a decision on whether the establishment of a credit union is economically advisable, the Commission shall give consideration to 12 C.F.R. § 701.1, which incorporates the National Credit Union Administration's Interpretive Ruling and Policy Statement 99-1 as it pertains to economic advisability.

B. The Commission may issue a certificate on condition that the credit union shall not begin to do business until it is actually issued insurance of accounts by an approved insuring organization.

C. A credit union that is not actually issued insurance of accounts by an approved insuring organization shall not receive funds or sell any shares.

Code 1950, § 6-205; 1952, c. 22; 1966, c. 584, § 6.1-197; 1968, c. 560; 1974, c. 115; 1978, c. 683; 1990, c. 373, § 6.1-225.14; 1999, c. 63; 2010, c. 794.

§ 6.2-1322. Contents of bylaws; amendments to bylaws generally.

The bylaws of a credit union shall specify:

1. The name of the credit union;

2. The purpose for which it was formed;

3. The time of the annual meeting of the members of the credit union, or a provision that the board of directors may set the time for the meeting. Such a meeting shall be held each calendar year. Notice of all meetings shall be given in a manner prescribed in the bylaws, subject to compliance with § 13.1-842;

4. The number, authority, and the duties of the directors and the authority, duties, and maximum compensation of all officers;

5. The conditions and qualifications for membership;

6. The number of members of the credit committee, if any, and of the supervisory committee, with their respective authorities and duties;

7. The conditions upon which shares may be issued, transferred, or withdrawn;

8. The conditions upon which loans may be made and repaid;

9. The manner of effecting the forfeiture of a member's shares when a member's share account balance is below the amount established by the bylaws and remains below such amount for a period of two years;

10. The manner in which dividends shall be determined and paid out;

11. The manner in which remaining assets are to be distributed in the event of dissolution after all distributions required by subdivision A 1 of § 13.1-907 have been made; and

12. The manner in which bylaws may be amended.

Code 1950, § 6-207; 1956, c. 90; 1966, c. 584, § 6.1-198; 1968, c. 560; 1980, c. 181; 1983, c. 300; 1990, c. 373, § 6.1-225.15; 2010, c. 794.

§ 6.2-1323. Amendments to articles of incorporation and bylaws.

A. Subject to the provisions of subsection B and §§ 13.1-886, 13.1-892, and 13.1-893, the articles of incorporation or the bylaws of a credit union may be amended as provided in the articles and bylaws, as the case may be. Amendments to the articles of incorporation shall be accomplished as provided in §§ 13.1-888 and 13.1-889.

B. If proposed amendments to the articles of incorporation or bylaws include an amendment to expand the field of membership of a credit union, then the amendments shall be submitted to the Commissioner, who shall approve or disapprove them within 30 days. No amendments to the articles of incorporation or bylaws that include an amendment to expand the field of membership shall be effective until such amendment has been approved by the Commissioner, who may extend the period for approval as he may deem necessary for as much as an additional 30 days.

Code 1950, § 6-208; 1966, c. 584, § 6.1-199; 1990, c. 373, § 6.1-225.16; 1999, c. 63; 2010, c. 794; 2012, cc. 44, 560.

§ 6.2-1324. Bylaws amended by Commission.

Any bylaw may be amended by the Commission by order entered on its order book and certified to the credit union. Before entering any such order the Commission shall notify the credit union of the proposed amendment and afford it an opportunity to be heard.

Code 1950, § 6-207; 1956, c. 90; 1966, c. 584, § 6.1-198; 1968, c. 560; 1980, c. 181; 1983, c. 300; 1990, c. 373, § 6.1-225.17; 2010, c. 794.

§ 6.2-1325. Fiscal year.

The fiscal year of every credit union shall end at the close of business on December 31.

Code 1950, § 6-218; 1956, c. 90; 1966, c. 584, § 6.1-209; 1968, c. 560; 1984, c. 353; 1990, c. 373, § 6.1-225.18; 2010, c. 794.

§ 6.2-1326. Establishing, moving, and closing offices.

A. As used in this section, "service facility" means a physical facility at a location other than its main office that is wholly owned by the credit union establishing it. "Service facility" does not include any automated teller machine, cash-dispensing machine, or similar electronic or computer terminal, regardless of whether it (i) is located on credit union premises or premises properly considered part of an authorized office of the credit union or (ii) receives or records deposits or disburses loan proceeds.

B. A credit union may maintain service facilities at locations other than its main office if the maintenance of such offices is reasonably necessary to serve its members, subject to the approval of the Commission. An application to establish such a service facility, accompanied by a fee of $200, shall be made on a form prescribed by the Commission. The Commission shall approve the establishment of the proposed service facility if it appears that the interest of the members of the applicant will be served thereby and that such establishment will not impair the financial condition of the applicant or any other credit union.

C. A credit union may (i) contract with one or more other credit unions subject to this chapter or organized under the laws of the United States or any other state to provide for the operation of one or more shared service facilities or (ii) provide for its members to have the use of one or more shared service facilities by contracting with a credit union service organization approved by the Commissioner for such purpose. A participating credit union may also invest in the credit union service organization. A credit union shall give prior written notice to the Commissioner of its participation in each shared service facility or credit union service organization. Notice to the Commissioner of a credit union's participation in a credit union service organization shall satisfy the requirement of subsection E that the Commissioner be notified of the establishment of an office, if the credit union service organization has notified the Commissioner of the establishment of the shared service facility.

D. The authority of the Commission and the Commissioner to supervise and regulate credit unions, as set forth in Article 2 (§ 6.2-1308 et seq.) of this chapter, shall extend to any shared service facility and any credit union service organization that is involved in the operation of a shared service facility that provides service to credit unions organized under this chapter, except that such authority shall not extend to the assets, records, books, and accounts of any federal credit union or credit union organized under the laws of another state.

E. A credit union may change the location of its main office, a service facility, or office, and may close any such office, provided it gives at least 30 days' prior written notice thereof to the Commissioner in such form as he may prescribe. A credit union shall notify the Commissioner in writing within 10 days after it establishes, relocates, or closes any office. A credit union shall notify the Commissioner of its withdrawal from participation in any shared service facility within 10 days of such withdrawal.

Code 1950, § 6-212; 1966, c. 584, § 6.1-203; 1990, c. 373, § 6.1-225.20; 1995, c. 326; 2006, c. 754; 2010, c. 794; 2015, cc. 19, 445.

Article 4 - MEMBERSHIP

§ 6.2-1327. Membership defined; field of membership.

A. The membership of a credit union shall consist of the incorporators, employees of such credit union, and other persons within the field of membership set forth in the bylaws as have: (i) been fully admitted into membership, (ii) paid any required entrance fee or annual membership fee, or both, (iii) subscribed for one or more shares, (iv) paid the initial installment thereon, and (v) complied with such other requirements as the articles of incorporation or bylaws specify.

B. Credit union membership shall be limited to persons within a specified field of membership, individuals within the immediate family or household of such persons, associations of such persons, other credit unions, and employees of the credit union. The field of membership specified shall be composed of one of the following:

1. A single group having a common bond of occupation or association;

2. More than one group, each of which has a common bond of occupation or association, and each of which does not exceed 3,000 members at the time it is proposed to be included in a multiple common-bond credit union. The 3,000-member limitation shall not apply if the Commission determines that an exception on the grounds provided in subsection (d) (2) or (d) (3) of § 101 of the Credit Union Membership Access Act (12 U.S.C. § 1759) is appropriate. In making any determination under this provision, the Commission shall give consideration to the National Credit Union Administration guidelines; or

3. Those persons or organizations within a well-defined local community, neighborhood or rural district.

The Commission shall in its discretion determine whether a proposed field of membership constitutes a "well-defined local community, neighborhood or rural district." In making such determination, the Commission shall give consideration to the definition of the term that has been adopted by the National Credit Union Administration and has become legally effective.

C. Except as the board of directors may provide to the contrary in the bylaws with respect to termination of membership, once a person or entity becomes a member of a credit union in accordance with this chapter, that person or entity may remain a member of that credit union until the person or entity chooses to withdraw from the credit union.

D. The board of directors may expel from the credit union any member who: (i) has not carried out his obligations to the credit union; (ii) has been convicted of a criminal offense; (iii) neglects or refuses to comply with the provisions of this chapter or of the bylaws; (iv) neglects to pay his debts, or otherwise causes financial loss to the credit union; or (v) has deceived the credit union with regard to the use of borrowed money. No member shall be so expelled until he has been informed in writing of the charges against him, and an opportunity has been given to him, after reasonable notice, to be heard.

E. Members of the credit union shall not be personally liable for payment of the debts of the credit union.

F. The surviving spouse of a deceased credit union member shall be eligible to become a member of the credit union to which the deceased member belonged. In no other instance shall an individual be eligible for membership in a credit union on the basis of the individual's relationship to another person who is eligible for membership in the credit union, unless the individual is a member of the immediate family or household of such person. The board of directors of a credit union may provide in the bylaws for a less inclusive policy governing membership by virtue of relationship to another person, and such policy shall be effective.

G. Societies, associations, organizations, partnerships, and corporations composed of persons who are eligible for membership may be admitted to membership in the same manner and under the same conditions as such persons.

H. Any individual or entity that was a member of a credit union as of July 1, 1999, may remain a member of the credit union after that date, and any group that was included in the field of membership of a credit union on that date may remain within the field of membership of that credit union after that date. The successor of an entity that was a member or was eligible for membership in a credit union or for inclusion in a field of membership on July 1, 1999, retains the status of its predecessor.

Code 1950, § 6-213; 1956, c. 90; 1966, c. 584, § 6.1-204; 1968, c. 560; 1990, c. 373, § 6.1-225.23; 1999, c. 63; 2010, c. 794.

§ 6.2-1328. Expansion of field of membership.

When practicable and consistent with reasonable safety-and-soundness standards, the Commission shall encourage the formation of a separately chartered credit union instead of adding a new group to the field of membership of an existing credit union. If the Commission finds that the formation of a separate credit union by a group desiring such services is not practicable, or is not consistent with reasonable safety-and-soundness standards, it may authorize the group to be included in the field of membership of a state credit union that is located within reasonable proximity, if the Commission finds, based on the information it compiles, that the credit union proposed to be expanded:

1. Is adequately capitalized and will continue to have insurance on its members' shares and other accounts;

2. Has not engaged in any materially unsafe or unsound practice in the year preceding its application to expand; and

3. Has the management, administrative and financial resources to serve the additional group effectively. The Commission shall not authorize the proposed inclusion of a new group unless it finds that any potential harm to another insured credit union or its members which would likely result from the proposed expansion is clearly outweighed in the public interest by the probable beneficial effects of the proposed expansion in meeting the convenience and needs of the members of the group proposed to be included.

1999, c. 63, § 6.1-225.23:1; 2010, c. 794.

§ 6.2-1329. Membership meetings; voting.

A. The annual meeting and any special meeting of the credit union shall be held in accordance with the bylaws.

B. At all meetings a member shall have but one vote. Except as hereinafter provided, no member may vote by proxy, but a member may vote by absentee ballot, mail, or other method if the bylaws so provide. An entity having membership in the credit union may be represented by one person authorized by the entity to so represent it. At any meeting called for the purpose of amending the articles of incorporation or dissolving the credit union any member may vote by proxy.

C. The board of directors may establish a minimum age, not greater than 18 years of age, as a qualification of eligibility to vote at meetings of the members, to hold office, or both.

Code 1950, § 6-218; 1956, c. 90; 1966, c. 584, § 6.1-209; 1968, c. 560; 1984, c. 353; 1990, c. 373, § 6.1-225.24; 2010, c. 794.

§ 6.2-1330. Special meetings.

A. The supervisory committee by a majority vote may call a meeting of the members to consider any violation of this chapter, the credit union's articles of incorporation or bylaws, or any practice of the credit union deemed by the supervisory committee to be unsafe or unauthorized.

B. The bylaws may also prescribe the manner in which a special meeting of the members may be called by the members or by the board of directors.

Code 1950, § 6-222; 1966, c. 584, § 6.1-213; 1974, c. 106; 1982, c. 574; 1990, c. 373, § 6.1-225.25; 2010, c. 794.

Article 5 - SHARE INSURANCE

§ 6.2-1331. Definitions.

As used in this article, unless the context requires a different meaning:

"Corporation" means a corporation organized in accordance with this article.

"Member credit union" means a credit union which is a member of the corporation.

"Shares" means the interest of a member having a savings account in a member credit union.

1974, c. 587, § 6.1-226.2; 2010, c. 794.

§ 6.2-1332. Insurance of shares.

Every credit union authorized to do business in the Commonwealth shall insure its members' shares with an approved insuring organization. A credit union that has been denied a commitment for insurance or fails to maintain insurance upon its shares shall either dissolve or merge with another credit union that is insured by such an insuring organization.

1974, c. 116, § 6.1-200.1; 1990, c. 373, § 6.1-225.26; 2010, c. 794.

§ 6.2-1333. Establishment of corporation; purposes.

A. Nine or more individuals, all of whom are duly authorized representatives, respectively, of nine or more credit unions may, pursuant to the provisions of the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.), establish a corporation for the purpose of:

1. Aiding and assisting any member credit union that is in liquidation or is experiencing financial difficulties, such as insolvency or nonliquidity, in order that the shares of a member of a member credit union shall be protected;

2. Providing insurance for the shares of members of a member credit union in amounts, not less than $20,000, that shall be established from time to time by the corporation with the approval of the Commission; and

3. Cooperating with the Commission and member credit unions in maintaining and advancing the financial integrity of member credit unions.

B. Except as otherwise herein provided, a corporation organized in accordance with this article shall (i) have the powers contained in the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.); (ii) be subject to the provisions thereof; and (iii) include in its corporate name the words "Credit Union Share Insurance."

1974, c. 587, § 6.1-226.3; 2010, c. 794.

§ 6.2-1334. Contents of corporation bylaws; amendments thereto.

A. The bylaws of a corporation shall specify:

1. The requirements for membership including contributions to loss reserve, and for the revocation of membership;

2. The date of the annual meeting;

3. The number of directors, which shall not be less than five;

4. The conditions upon which loans to member credit unions may be made;

5. The manner in which remaining assets are to be distributed in the event of dissolution after all distributions required by subdivisions A 1 through A 3 of § 13.1-907 of the Virginia Nonstock Corporation Act have been made;

6. The manner and terms upon which reinsurance of shares may be obtained; and

7. The conditions upon which contributions to loss reserve may be refunded when membership is terminated.

B. Bylaws filed with and approved by the Commission shall be the bylaws of the corporation, and no amendments thereto by the corporation shall be operative unless they conform to the provisions of this article and are approved by the Commission.

C. Bylaws may be amended by the Commission by an order entered on its order book and certified to the corporation. Before any such order is entered, the Commission shall notify the corporation of the proposed amendment and afford it an opportunity to be heard thereon.

1974, c. 587, § 6.1-226.4; 1985, c. 365; 2010, c. 794.

§ 6.2-1335. Application for membership; share insurance required.

A. Every credit union organized:

1. Prior to January 1, 1975, the shares of which are not insured by the National Credit Union Share Insurance Fund on that date, shall apply for membership in a corporation before January 1, 1976; and

2. On or after January 1, 1975, shall apply for membership in a corporation within 30 days after its organization or by January 1, 1976, whichever is later.

B. Failure to apply for membership in a corporation as required by subsection A shall constitute grounds for the revocation by the Commission of the credit union's certificate of authority to do business.

C. Every credit union (i) that is required by subsection A to apply for membership in a corporation and (ii) whose shares are not insured by a corporation at least in the amount of $20,000 for each member, by July 1, 1976, shall not thereafter receive the savings of its members or issue thereto any other debt obligation until its shares are so insured. If the Commission determines that share insurance issued by a corporation is not available to a credit union and that its shares are insured by the National Credit Union Share Insurance Fund or under a plan of share insurance that has been approved by the Commission, the credit union shall be permitted to continue its normal operations.

1974, c. 587, § 6.1-226.5; 2010, c. 794.

§ 6.2-1336. Loss reserve contributions.

A. A corporation shall collect from each credit union accepted for membership an initial contribution to loss reserve the greater of (i) $5 or (ii) an amount equal to the percentage fixed in the bylaws of the corporation, which percentage shall not exceed one percent, of the amount of its shares outstanding on the last day of the month preceding the month in which application is filed. Whenever the initial contribution to loss reserve and any additions thereto paid by a credit union amount to less than the prescribed percentage of its outstanding shares of December 31, of any year, the corporation shall collect the amount of the deficiency so that the total contributions to loss reserve paid by each credit union is never less than the prescribed percentage of the amount of its outstanding shares on December 31 of any year in which it is a member, except to the extent that refunds have been paid under subsection B. The amount of contribution by a credit union shall be carried on the books of each credit union as an investment.

B. Subject to the approval of the Commission, contributions to loss reserve may be refunded to existing members whenever in the judgment of the directors the financial condition of the corporation warrants such action. Refunds so made shall be on the basis of a uniform percentage of the total contributions to loss reserve paid by each credit union and shall be credited to its reserve fund to the extent that such contribution was charged thereto.

1974, c. 587, § 6.1-226.6; 1985, c. 365; 2010, c. 794.

§ 6.2-1337. Annual and special assessments.

A. A regular annual assessment, not to exceed one-twelfth of one percent of the member credit union's outstanding shares, shall be levied by the directors. The directors may raise, lower or waive such assessment for any year when the directors and the Commission agree that the net worth of the corporation justifies or requires such change. The member credit union's outstanding shares as of December 31 shall be the basis for calculating the assessment due in the ensuing year, and the directors shall determine the date the annual assessment is due and payable.

B. In the event of potential impairment of the corporation's funds, special assessments may be levied by the directors with the approval of the Commission.

C. Upon a finding by the Commission that it is necessary in order to maintain the financial soundness of the insurance fund, it may direct that the corporation make special assessments of its members.

1974, c. 587, § 6.1-226.7; 1976, c. 658; 1985, c. 365; 2010, c. 794.

§ 6.2-1338. Duties and additional powers of corporation.

A corporation shall have the following powers in addition to those otherwise provided:

1. To advance funds to aid member credit unions to operate and meet liquidity requirements;

2. To assist in the merger, consolidation, and liquidation of credit unions;

3. To receive by assignment or purchase from member credit unions property of any nature owned by them;

4. Upon written direction of the Commission, to assume control of the property and business of any member credit union and to operate the credit union in accordance with the directions of the Commission; and

5. To invest its funds in (i) bonds, notes, or securities of the Commonwealth and of the federal government, and their agencies; (ii) deposits in banks doing business in the Commonwealth; (iii) deposits in any savings institution doing business in the Commonwealth the accounts of which are insured by the Federal Deposit Insurance Corporation or other federal insurance agency; and (iv) such other investments as are deemed prudent by the directors and are approved by the Commission.

1974, c. 587, § 6.1-226.8; 1990, c. 3; 2010, c. 794.

§ 6.2-1339. Duties and powers of Commission; judicial review.

A. The Commission shall promptly forward to the corporation copies of all examination reports of member credit unions. The cost of furnishing the copies shall be paid by the corporation.

B. If the Commission determines, pursuant to the provisions of § 6.2-1311 or 6.2-1313, that it should take possession of the business and property of a member credit union, the Commission may direct the corporation to assume control of such business and property and, subject to the Commission's orders operate the credit union until such time as the Commission permits the credit union to resume business or until its assets are finally liquidated. If the Commission orders the liquidation of an insolvent member credit union then in the control of the corporation through the purchase of the assets and the assumption of the liabilities of such credit union by another insured credit union, the corporation shall be empowered to convey all right, title, and interest in all or part of the assets and liabilities of the insolvent credit union to the other insured credit union. Upon such transfer, good title to the assets and liabilities conveyed shall vest in the other insured credit union. Any cost or expense incurred by the corporation in such operation of the credit union may be reimbursed from the assets of the credit union by an order of the Commission.

C. The Commission may suspend or revoke, after notice of hearing, the certificate of authority to do business of any member credit union that fails to pay, when due, any assessment made by the corporation pursuant to this article.

D. Any final action or order of the Commission under this article shall be subject to judicial review in accordance with the provisions of § 12.1-39.

1974, c. 587, § 6.1-226.9; 1985, c. 366; 2010, c. 794.

§ 6.2-1340. Supervision, reports and examinations by Commission.

A. The corporation shall be subject to supervision and annual examination by the Commission. The cost of each examination shall be paid by the corporation. The corporation shall file annually by such time and in such form as the Commission prescribes a statement showing its financial condition on December 31 of the previous year.

B. In addition to the annual statement, the Commission from time to time may require the corporation to file such further reports, exhibits or statements as it deems necessary to furnish full information concerning the condition, solvency, transactions and affairs of the corporation. The Commission shall prescribe the time within which such additional reports, exhibits or statements shall be filed and may require verification by such officers of the corporation as it may designate.

C. Whenever the Commission deems it expedient to do so, it may make or direct to be made additional examinations of the affairs of the corporation, the cost of which shall be paid by the corporation. Upon completion of an examination, a copy of the report thereof shall be furnished to the corporation.

1974, c. 587, § 6.1-226.10; 2010, c. 794.

§ 6.2-1341. Audit by corporation and corrective measures; appeal.

A. A corporation may require independent audits and investigations of any member credit union to ascertain its financial condition as it relates to share insurance.

B. If the directors of a corporation ascertain evidence of carelessness, unsound practices, or mismanagement of any member credit union that appears to adversely affect the solvency or liquidity of the credit union or threaten loss to the corporation, the directors shall notify the Commission and may order that corrective action be taken or, after due notice and hearing, as provided in the bylaws, revoke the credit union's membership in the corporation.

C. If a member credit union is aggrieved by any decision, action, or order of the corporation, it may appeal the decision, action, or order to the Commission. The Commission may modify, reverse, or affirm such decision, action, or order.

1974, c. 587, § 6.1-226.11; 2010, c. 794.

§ 6.2-1342. Tax exemptions.

Any corporation shall be exempt from all state and local taxes except real and personal property taxes.

1974, c. 587, § 6.1-226.12; 2010, c. 794.

§ 6.2-1343. Inconsistent laws inapplicable.

All other general or special laws, or parts thereof, inconsistent with the provisions of this article shall be inapplicable to the provisions of this article.

1974, c. 587, § 6.1-226.13; 2010, c. 794.

Article 6 - CHANGE IN CORPORATE STATUS

§ 6.2-1344. Voluntary merger.

A. A credit union organized under this chapter may merge, with the approval of the Commission, with one or more other credit unions, state or federal. In any case in which the surviving credit union will be a Virginia state-chartered credit union, a merger application, accompanied by an application fee of $300, shall be filed with the Commission. The Commission shall approve the application if the Commission finds that:

1. The field of membership of the credit union which is proposed to result from the merger satisfies the requirements of subsection B of § 6.2-1327, unless the merger application is exempt from this condition pursuant to subsection B;

2. The plan of merger will promote the best interests of the members of the credit unions; and

3. The members of the merging credit unions have approved the plan of merger in accordance with applicable laws and regulations. Notwithstanding subsection D of § 13.1-895, the members of a Virginia state-chartered credit union may authorize a plan of merger by vote of at least a majority of all votes cast thereon at an annual or special meeting at which a quorum is present. Notwithstanding the terms of § 13.1-895, in a merger where a Virginia credit union will be the resulting credit union, the adoption of the plan of merger by the board of directors of that credit union shall be sufficient approval of the plan, and approval of the plan of merger by the members of that credit union shall not be required. Notice of the meeting may be given in a manner prescribed in the articles of incorporation or bylaws, notwithstanding the terms of § 13.1-842 relating to the manner of notice. A federal credit union merging with a state credit union may give notice to its members as prescribed by federal regulation.

B. The condition set forth in subdivision A 1 shall not apply to a merger of two Virginia state-chartered credit unions, and notwithstanding subsection B of § 6.2-1327 the field of membership of the surviving credit union may be composed of a combination of the fields of membership of the merging credit unions, if (i) at least one of the merging credit unions has fewer than 35,000 active members on the date the application for merger is filed with the Commission and (ii) neither of the merging credit unions has been a party to a merger pursuant to this subsection within the 24 months preceding the date the application for merger is filed with the Commission.

C. If the Commission finds that the applicable requirements of subsection A have been met and all required fees have been paid, it shall approve the merger and issue a certificate of merger, which shall be admitted to record in its office and in the office for the recording of deeds in the city or county in which the registered office of each credit union is located. No such further recordation shall be required in the City of Richmond or the Counties of Chesterfield or Henrico.

D. Upon the issuance of the certificate of merger the provisions of § 13.1-897, mutatis mutandis, shall become effective.

E. For the purposes of this section, a member entitled to vote may vote in person or, unless the articles of incorporation or bylaws otherwise provide, by proxy. A member may appoint a proxy to vote or otherwise act for him by signing an appointment form. An appointment of a proxy becomes effective when received by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for 11 months unless a different period is expressly provided in the appointment form or the appointment is revoked by the member.

1980, c. 182, § 6.1-200.3; 1983, c. 465; 1988, c. 152; 1990, c. 373, § 6.1-225.27; 1999, c. 63; 2007, c. 925; 2010, c. 794; 2016, cc. 396, 695.

§ 6.2-1345. Voluntary dissolution.

A. A credit union may dissolve in accordance with the provisions of Article 13 (§ 13.1-902 et seq.) of Chapter 10 of Title 13.1. Within 10 days after the board of directors votes to recommend dissolution to the members, the board shall notify the Commissioner and the insuring organization of that fact in writing, setting forth the reasons for the proposed dissolution.

B. The dissolving credit union shall also (i) notify the Commissioner of the result when the members have voted on the proposal to dissolve and (ii) file with the Commissioner a copy of the certificate of dissolution and the certificate of termination of corporate existence of the credit union within 10 days of the issuance of each.

1990, c. 373, § 6.1-225.28; 2010, c. 794.

§ 6.2-1346. Conversion of federal credit union to state credit union.

A credit union organized under the laws of the United States and authorized to do business in the Commonwealth may convert to a credit union organized under the laws of the Commonwealth by the following procedure:

1. The directors of the federal credit union shall organize a corporation under this chapter and the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) for the purpose set forth in § 6.2-1320;

2. The new corporation shall apply for a certificate of authority to do business as a credit union as provided in § 6.2-1321;

3. The federal credit union shall follow the procedures set forth in § 125 (a), of the Federal Credit Union Act (12 U.S.C. § 1771), as it now exists or may hereafter be amended, for conversion;

4. Upon completion of the requirements of the Federal Credit Union Act, the authorized officers of the federal credit union shall execute a certificate setting forth the procedures followed, the number of members eligible to vote and the number voting in favor of the plan of conversion and file said certificate with the Commission; and

5. When the Commission has determined that all of the requirements of this section have been complied with, and that the criteria of § 6.2-1321 have been met, the Commission shall authorize the state-chartered credit union to commence business as of the date it ceases to be a federal credit union. The successor state-chartered credit union shall be vested with all of the assets and shall continue to be responsible for all of the obligations of the federal credit union to the same extent as though the conversion had not taken place.

1984, c. 352, § 6.1-200.6; 1990, c. 373, § 6.1-225.29; 2010, c. 794.

§ 6.2-1347. Conversion of state credit union to federal credit union.

A state credit union may convert to a federal credit union by the following procedure:

1. At any meeting of the members called and held in accordance with the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) to consider such action, the members, by an affirmative vote of those holding and voting two-thirds of the votes present in person or by proxy, may resolve to convert the credit union into a federal credit union;

2. A copy of the minutes of the meeting duly certified by the authorized officer of the credit union shall be transmitted to the Commission;

3. The state credit union shall take such action as is necessary under § 125 (b) of the Federal Credit Union Act (12 U.S.C. § 1771), as it now exists or may hereafter be amended, to make it a federal credit union;

4. It shall file with the Commission a certified copy of the organization certificate approved by the National Credit Union Administration Board; and

5. Upon receipt of the organization certificate the state credit union shall become a federal credit union which shall be vested with all of the assets and shall continue to be responsible for all of the obligations of the state credit union to the same extent as though the conversion had not taken place.

1984, c. 352, § 6.1-200.7; 1990, c. 373, § 6.1-225.30; 2010, c. 794.

§ 6.2-1347.1. Conversion to a state mutual savings institution.

A. A state credit union is authorized to convert to a mutual savings institution organized under Chapter 11 (§ 6.2-1100 et seq.) of this title.

B. As a condition to converting to a mutual savings institution, a credit union shall comply with the following requirements:

1. At least 60 days prior to a final vote by the board of directors to formally adopt a conversion proposal, the credit union shall send notice to the Commissioner and each member advising that the board is considering a possible conversion to a mutual savings institution. Such notice also shall be (i) published concurrently in a newspaper of general circulation in the credit union's service area; (ii) posted on the credit union's website; and (iii) posted in a conspicuous place in the lobby of each of the credit union's offices. The notice shall, at a minimum, contain the following information:

a. A prominent legend in bold-face type that advises the members of a potential conversion;

b. The electronic availability of information related to a potential conversion;

c. A telephone number and e-mail address that members may use to request copies of the potential conversion information that is available by electronic means;

d. The ability of members to submit written comments on the potential conversion; and

e. A clear, concise, and impartial description of the potential conversion to be considered by the board.

2. The credit union shall post information related to a potential conversion on the credit union's principal Internet web site at least 60 days prior to a vote by the board of directors to adopt a proposal of conversion. The posted information shall, at a minimum, discuss:

a. The business purposes that might be accomplished by a conversion;

b. The differences between and similarities of a credit union and a mutual savings institution;

c. An estimate of the anticipated conversion expenses;

d. The methods by which a member may request a copy of the posted information;

e. The method and timeline for members to submit written comments on the potential conversion; and

f. The process that will be followed if the board formally adopts a conversion proposal.

3. The board shall provide members a reasonable opportunity to submit written comments relating to a potential conversion. The board may hold a special meeting to receive member input regarding the potential conversion. It is within the board's discretion to determine the type, number, duration, and location of any special meeting. Before taking a final vote on a conversion proposal, the board shall review and consider all written comments and any other member input received at any special meeting. The conversion resolution shall state that the board has reviewed and considered all such comments and input and has determined affirmatively that the conversion is in the best interests of the members.

4. Subsequent to the written comment period, the credit union shall adopt, by the affirmative vote of at least a majority of the members of its board of directors, a conversion proposal consistent with this section. The credit union shall notify the Commissioner of the board's approval of the proposal, and shall file an application in accordance with § 6.2-1118 and pay the accompanying fee in accordance with § 6.2-1202. In addition, the credit union shall send to the Commissioner as soon as reasonably practical (i) a budget of the anticipated conversion expenses including legal, postage and mailing, advertising, printing, consulting fees, examination and operating fees, and any overtime or other employee compensation to be paid exclusively as a result of the conversion and (ii) any other information reasonably requested by the Commissioner.

5. At least 30 days prior to a vote by the members to formally adopt the conversion proposal, the credit union shall mail to each member a notice of a meeting of the members to consider the conversion proposal, advising the members of the board's adoption of the conversion proposal. The notice must include a prominent statement that the conversion will be decided by a vote of members eligible to vote on the proposal under the credit union's bylaws and that the affirmative votes of two-thirds of those eligible members voting are required for approval unless the articles of incorporation require a greater or lesser vote in which case the notice shall specify that percentage. However, in no case shall the percentage vote be less than a majority of the members voting notwithstanding what is specified in the articles of incorporation. The notice shall clearly inform the members that they may vote at the members' meeting on the proposal or submit the written ballot included with the notice. Each eligible member is entitled to one vote. With the notice, members shall be provided plain language disclosures of material facts and information to be used as a basis for reaching an informed decision to vote on the conversion, including but not limited to a summary of all information required by subdivision B 2. The disclosures shall be submitted to the Commissioner. The Commissioner may suggest changes in the disclosures prior to the documents being mailed to members.

6. A director, officer, committee member, agent, or senior management employee of the credit union, and immediate family members of any such individuals, shall not, directly or indirectly, receive a fee, commission, or other consideration, other than that person's usual salary or compensation, for aiding, promoting, or assisting in a conversion under this section. A violation of this subdivision shall constitute a prima facie violation of subsection A of § 13.1-870.

7. The corporate existence of a credit union converting under this section shall continue in its successor. Each member shall be entitled to receive a share or deposit account or accounts in the converted institution equal in amount to the value of accounts held in the former credit union subject to any lien or right of offset held by the credit union.

8. The Commission shall approve the conversion if all of the conditions required by this section and § 6.2-1118 have been met, unless the Commission determines that, because of a concern over the safety and soundness of the credit union, the conversion is not in the best interest of the credit union or its members.

9. The eligible and voting members of the credit union must approve the conversion proposal by a two-thirds affirmative vote of those voting, or such greater or lesser vote provided for under the articles of incorporation, but in no event less than a majority of the members voting notwithstanding what the articles of incorporation may specify. Such vote shall be by secret ballot and shall be conducted by an independent entity, which may be such credit union's legal or accounting firm.

10. Following approval of the conversion by the members, the conversion shall become effective when (i) the Commission shall have approved it and (ii) any amendment of the articles of incorporation of the credit union necessary to effect the conversion shall have become effective.

C. If any requirements for notice, meetings, voting or other requirements in this section are inconsistent with the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.), the provisions of this section shall control.

2010, cc. 230, 372, § 6.1-225.30:1.

Article 7 - DIRECTION OF AFFAIRS

§ 6.2-1348. Board of directors; number; election; term; appointment of supervisory and credit committees.

A. The board of directors shall have the authority and responsibility for directing the business affairs, funds, and records of the credit union.

B. The board shall consist of an odd number of directors, at least five in number, to be elected by and from the members. After the election of the initial board at the organizational meeting, the election of the board shall be held at the annual meeting or at such other time as the bylaws provide.

C. A director shall be elected for a term of not less than one year nor more than four years, as provided in the bylaws. If the term is more than one year, the bylaws shall establish terms of office so that an approximately equal number of directors shall be elected each year. A director, unless removed from office, shall hold office until a successor is elected and qualified. Directors may serve more than one term. Any vacancy on the board of directors shall be filled until the next annual election by appointment by the remainder of the directors.

D. The board of directors at its first meeting following the annual election shall appoint a supervisory committee from the membership. The supervisory committee shall consist of an odd number of members, not less than three. No member of the board of directors or the credit committee shall serve on the supervisory committee. The terms for the members of the supervisory committee shall be as provided in the bylaws.

E. Unless the members have authorized and directed the board of directors to serve as the credit committee, the board of directors at its first meeting following the annual election shall either appoint:

1. A credit committee, which shall be appointed from the membership. The credit committee shall consist of an odd number of members, not less than three. No member of the board of directors or the supervisory committee shall serve on the credit committee unless authorized by the provisions of this section. The terms for the members of the credit committee shall be as provided in the bylaws; or

2. One or more loan officers to carry out the duties and responsibilities of the credit committee.

Code 1950, § 6-219; 1966, c. 584, § 6.1-210; 1968, c. 560; 1982, c. 575; 1983, c. 301; 1990, c. 373, § 6.1-225.31; 2010, c. 794.

§ 6.2-1349. Board of directors; election of officers.

A. At its first meeting after the annual election, the board of directors shall elect from its own number (i) an executive officer, who may be designated as chairman of the board or president; (ii) a vice-chairman of the board or one or more vice-presidents; (iii) a secretary; and (iv) a treasurer. The same member may simultaneously hold more than one office in the credit union, if the bylaws so provide. The board of directors shall also elect any other officers that are specified in the bylaws.

B. The board of directors shall appoint (i) a chief operating officer of the credit union to be in active charge of its operations and (ii) a financial officer. The chief operating officer may also serve as the financial officer.

C. The terms of the officers shall be one year or until their successors are elected and qualified.

D. The duties of the officers shall be as prescribed in the bylaws.

E. A credit union may use any other title it chooses for officers, so long as such titles are not misleading.

Code 1950, § 6-220; 1964, c. 75; 1966, c. 584, § 6.1-211; 1968, c. 560; 1982, c. 572; 1983, c. 158; 1984, c. 354; 1988, c. 275; 1990, c. 373, § 6.1-225.32; 2010, c. 794.

§ 6.2-1350. Executive committee.

The board of directors may appoint from its own number an executive committee, consisting of not less than three directors. The executive committee may be authorized to act for the board in all respects, subject to such conditions and limitations as are prescribed by the board and subsection D of § 13.1-869.

1990, c. 373, § 6.1-225.33; 2010, c. 794.

§ 6.2-1351. Meetings of directors.

The board of directors and the executive committee shall meet as often as the bylaws prescribe.

Code 1950, § 6-220; 1964, c. 75; 1966, c. 584, § 6.1-211; 1968, c. 560; 1982, c. 572; 1983, c. 158; 1984, c. 354; 1988, c. 275; 1990, c. 373, § 6.1-225.34; 2010, c. 794.

§ 6.2-1352. Compensation of officials.

A. Compensation of members of the board of directors and members of the credit and supervisory committees shall be determined by a written policy approved by the board of directors, provided that annual compensation for an individual member does not exceed $6,000.

B. Health, accident, and term life insurance protection for a director or committee member shall not be considered compensation.

C. Directors and committee members, while on official business of the credit union, may be reimbursed for expenses consistent with Internal Revenue Service guidelines.

Code 1950, § 6-220; 1964, c. 75; 1966, c. 584, § 6.1-211; 1968, c. 560; 1982, c. 572; 1983, c. 158; 1984, c. 354; 1988, c. 275; 1990, c. 373, § 6.1-225.35; 1995, c. 325; 2010, c. 794; 2020, cc. 262, 547.

§ 6.2-1353. Powers and duties of directors.

In addition to any other duties set forth in this chapter, the board of directors shall have the following powers and duties:

1. To act upon applications for membership and upon the expulsion of a member. The board of directors may appoint one or more membership officers to act upon applications for membership. A record of the membership officer's approval or denial of membership shall be available to the board of directors for inspection. A person denied membership by a membership officer may appeal the denial to the board;

2. To purchase and maintain fidelity bond coverage, in accordance with regulations of the Commission;

3. To determine from time to time the rates of interest that shall be charged on loans and to prescribe the conditions under which interest refunds will be made;

4. To fix the amount, if any, that may be charged for initial and annual membership fees;

5. To determine the maximum amount of shares that may be held by, and the maximum amount which may be loaned to, any one member;

6. To declare dividends on share accounts;

7. To determine the manner in which dividends shall be paid on shares issued or withdrawn during a dividend period;

8. To fill vacancies in the supervisory committee or in the credit committee until the election or appointment, as the case may be, and qualification of successors;

9. To remove any member of the board of directors failing to attend regular meetings of the board without good cause shown for three consecutive months or otherwise failing to perform any of the duties devolving upon him as a director;

10. To remove any member of the credit committee failing to attend three consecutive regular meetings of the credit committee without good cause shown or otherwise failing to perform any of the duties devolving upon him as a credit committee member;

11. To suspend any member of the supervisory committee failing to attend regular meetings of the supervisory committee without cause or otherwise failing to perform any of the duties devolving upon him as a supervisory committee member, provided that the members shall decide at a meeting held not less than 10 nor more than 25 days after such suspension if such suspended committee member shall be removed from or restored to the supervisory committee;

12. To have charge of the investment of the funds of the credit union, except that the board of directors may designate an investment committee or any qualified individual to have charge of making investments pursuant to written policies established by the board of directors;

13. To establish policy on loans to members, which policy shall provide that the rates, terms, and conditions on any loan or line of credit either made to, or endorsed or guaranteed by (i) an official, (ii) an immediate family member of an official, or (iii) any individual having a common ownership, investment, or other pecuniary interest in a business enterprise with an official or with an immediate family member of an official shall not be more favorable than the rates, terms, and conditions for comparable loans or lines of credit to other credit union members;

14. To designate a depository or depositories for the funds of the credit union;

15. To authorize the acquisition or conveyance of real property;

16. To authorize the employment and compensation of the president or person named by the board to manage the affairs of the credit union;

17. To make adequate provisions for reserves; and

18. To perform such other duties as the members may from time to time authorize.

Code 1950, § 6-220; 1964, c. 75; 1966, c. 584, § 6.1-211; 1968, c. 560; 1982, c. 572; 1983, c. 158; 1984, c. 354; 1988, c. 275; 1990, c. 373, § 6.1-225.36; 2010, c. 794.

§ 6.2-1354. Credit committee or loan officers; appeal.

A. The credit committee of a credit union shall approve every loan or advance made by the credit union to members, unless the committee is replaced by a loan officer as provided in subdivision E 2 of § 6.2-1348.

B. If the credit committee has not been replaced by action of the board of directors, it may appoint and delegate to loan officers the authority to approve or disapprove loan applications, subject to the written policies prescribed by the board of directors. The approval of an application by the credit committee shall be by a majority of members of the committee who are present at the meeting at which it is considered, provided a majority of the full committee is present.

C. All applications disapproved by a loan officer may, upon request of the applicant, be reviewed by the credit committee. The approval of a majority of members of the credit committee who are present at the meeting when such review is undertaken shall be required to reverse the loan officer's decision. A majority of members of the full credit committee shall be present at such review. A member whose application was disapproved by a loan officer or the credit committee may appeal such action to the board of directors.

D. No individual shall have the authority to disburse funds of the credit union for any loan for which the application has been approved by him in his capacity as a loan officer.

E. The credit committee shall meet as often as the business of the credit union may require to consider applications for loans or to review the work of the loan officers, as the case may be. Reasonable notice of each such meeting shall be given to each member of the committee.

Code 1950, § 6-221; 1964, c. 75; 1966, c. 584, § 6.1-212; 1974, c. 143; 1983, c. 302; 1990, c. 373, § 6.1-225.37; 2010, c. 794.

§ 6.2-1355. Supervisory committee; suspension and removal of officials.

The supervisory committee:

1. Shall make or cause to be made an annual audit of the credit union, and shall submit a report of that audit to the board of directors and a summary of the report to the members at the next annual meeting of the credit union;

2. Shall make or cause to be made such supplementary audits and verification of members' accounts as it deems necessary or as may be ordered by the board of directors, and shall submit such report to the board of directors; and

3. May by unanimous vote suspend any officer of the credit union or any member of the credit committee or of the board of directors, until the next meeting of members, which shall be held not less than 10 nor more than 25 days after any such suspension, at which meeting such suspension shall be acted upon by the members.

Code 1950, § 6-222; 1966, c. 584, § 6.1-213; 1974, c. 106; 1982, c. 574; 1990, c. 373, § 6.1-225.38; 2010, c. 794.

§ 6.2-1356. Special audit.

The Commissioner may require a credit union to have an independent audit made of its books, records, and methods of operation by a certified public accountant or other qualified person or firm approved by the Commissioner, whenever it appears to the Commissioner that (i) the system of internal controls pertaining to the credit union is not adequate, (ii) the credit union is engaging in unsafe or unsound practices, or (iii) the financial condition of the credit union makes such an audit necessary.

1976, c. 658, § 6.1-213.1; 1990, c. 373, § 6.1-225.39; 2010, c. 794.

§ 6.2-1357. Qualifications of officials.

Every officer, director, and committee member shall be a member of the credit union.

Code 1950, § 6-213; 1956, c. 90; 1966, c. 584, § 6.1-204; 1968, c. 560; 1990, c. 373, § 6.1-225.40; 2010, c. 794.

Article 8 - ACCOUNTS

§ 6.2-1358. Share accounts.

A. Every credit union may issue shares to and maintain share accounts for any member qualified pursuant to the credit union's bylaws.

B. Shares and share accounts may be withdrawn for payment to the account holder or to third parties in such manner and in accordance with such procedures as may be established by the board of directors.

C. Shares and share accounts shall be subject to any withdrawal notice requirement that may be imposed pursuant to the credit union bylaws.

Code 1950, § 6-214; 1956, c. 90; 1966, c. 584, § 6.1-206; 1968, c. 560; 1975, c. 33; 1990, c. 373, § 6.1-225.41; 2010, c. 794.

§ 6.2-1359. Payment for shares; transfers; lien on shares.

Shares shall be paid for in money. Shares may be subscribed to, paid for, and transferred in such manner as the bylaws prescribe. The credit union shall have a lien on the shares, including share accounts of a member in his individual, joint, or trust accounts and upon any dividends payable thereon as security for all debts and obligations owed by, and for any loan endorsed by, such member to the credit union.

Code 1950, § 6-214; 1956, c. 90; 1966, c. 584, § 6.1-206; 1968, c. 560; 1975, c. 33; 1990, c. 373, § 6.1-225.42; 2010, c. 794.

§ 6.2-1360. Dividends.

A. At such intervals and for such periods as the bylaws provide and after provision for the required reserves, the board of directors may declare dividends on share accounts from the undivided earnings or other funds set aside for dividends.

B. Dividends may be paid at different rates on different types of share accounts and at different rates and maturity dates in the case of share certificates.

C. Dividend credit may be accrued on shares as authorized by the board of directors.

D. The rates of dividends and terms of payment may be declared in advance by the board of directors.

E. In no event shall a dividend be paid if, after the payment thereof, the liabilities of the credit union would exceed its assets.

Code 1950, § 6-228; 1964, c. 75; 1966, c. 584, § 6.1-219; 1968, c. 560; 1976, c. 202; 1990, c. 373, § 6.1-225.43; 2010, c. 794.

§ 6.2-1361. Ascertaining value of assets.

In ascertaining the value of the assets of a credit union:

1. A loan delinquent for more than two but less than six months shall be valued at 90 percent of the unpaid balance;

2. A loan delinquent for six months but less than 12 months shall be valued at 75 percent of the unpaid balance; and

3. A loan delinquent for 12 months or more shall be treated as of no value.

Code 1950, § 6-228; 1964, c. 75; 1966, c. 584, § 6.1-219; 1968, c. 560; 1976, c. 202; 1990, c. 373, § 6.1-225.44; 2010, c. 794.

§ 6.2-1362. Minors' accounts.

A credit union may issue shares in the name of a minor as the sole and absolute owner of such shares and may accept the purchase of such shares by and for such owner, pay withdrawals from such share accounts, and act in any other manner with respect to such share accounts on the order of such minor. Any withdrawal of shares or delivery of funds from such account to the owner thereof, or payment of a share draft or other written order for withdrawal signed by such minor owner, shall be a valid and sufficient release and discharge of the credit union for any payment, withdrawal, or delivery so made. The parent or guardian of such minor shall not in his capacity as parent or guardian have the power to withdraw or transfer shares in any such account unless the minor has given written notice to the credit union to accept the signature of such parent or guardian.

Code 1950, § 6-215; 1966, c. 584, § 6.1-207; 1968, c. 560; 1972, c. 825; 1979, c. 407; 1990, c. 373, § 6.1-225.45; 2006, c. 755; 2010, c. 794.

§ 6.2-1363. Individual retirement accounts and retirement or pension plans.

A. A credit union may act as trustee or custodian of (i) individual retirement accounts established with the credit union for the benefit of its members under the federal Employee Retirement Income Security Act of 1974 (P.L. 93-406, 88 Stat. 829) (ERISA), as amended from time to time; (ii) pension funds of self-employed individuals or of a company or organization sponsoring the credit union; or (iii) other similar retirement or pension plans.

B. Contributions to and earnings on an account described in clause (i) of subsection A may be accepted and retained in accordance with ERISA but shall be invested in shares of the credit union. If the credit union bylaws so provide such accounts may be established for the benefit of members in the names of other trustees or custodians who are qualified to serve as such under the laws of this Commonwealth and ERISA.

1976, c. 205, § 6.1-207.1; 1990, c. 373, § 6.1-225.46; 2010, c. 794.

§ 6.2-1364. Acceptance of money under Virginia Uniform Transfers to Minors Act.

A credit union may accept money paid to it pursuant to the Virginia Uniform Transfers to Minors Act (§ 64.2-1900 et seq.) for credit to an account in the name of the custodian as provided in such Act if the custodian or the minor for whose benefit the transfer is made is a member of the credit union.

1979, c. 138, § 6.1-207.2; 1990, c. 373, § 6.1-225.47; 2010, c. 794.

§ 6.2-1365. Accounts of deceased or incapacitated person.

A. A credit union may pay any share balance due a deceased person or any person under a disability to the personal representative, guardian, conservator, curator, or committee of such person upon proper proof of the appointment and qualification of such fiduciary. Such qualification shall be sufficient authority for making such payment. A credit union making such payment shall no longer be liable for the amount so paid to any person. The presentation of a duly certified letter or certificate of qualification as personal representative, or other fiduciary, guardian, conservator, curator, or committee shall be conclusive proof of the jurisdiction of the court issuing the same.

B. A credit union that has received no written notice and does not have actual notice that a member is deceased or has been adjudicated incapacitated, may pay or deliver shares in such member's account in accordance with the provisions of the account contract without liability to any person for the amounts so paid.

1968, c. 560, § 6.1-208.3; 1990, c. 373, § 6.1-225.48; 1997, c. 801; 2010, c. 794.

§ 6.2-1366. Repealed.

Repealed by Acts 2010, c. 269, cl. 2.

§ 6.2-1367. Application of provisions to federal credit unions.

The provisions of §§ 6.2-1365, 64.2-601, and 64.2-602 shall apply to federal credit unions operating in the Commonwealth to the extent that the same are not inconsistent with any federal law applicable to such credit unions.

1968, c. 560, § 6.1-208.5; 1979, c. 407; 1990, c. 373, § 6.1-225.50; 2010, cc. 269, 794; 2013, cc. 7, 95.

§ 6.2-1368. Accounts of fiduciaries.

A credit union may issue shares and maintain share accounts in the name of any person or entity eligible for membership in such credit union pursuant to § 6.2-1327 as administrator, executor, custodian, conservator, guardian, trustee, or other fiduciary for a named beneficiary. The payment of funds from any such account pursuant to a share draft or other written order of withdrawal signed by the fiduciary, the delivery of funds in such account to such fiduciary, or a receipt signed by any such fiduciary with regard to the payment of funds from such account, shall be valid and sufficient release and discharge of the credit union for the payment or delivery so made.

2000, c. 744, § 6.1-225.50:1; 2010, c. 794.

§ 6.2-1369. Credit union need not inquire as to fiduciary funds used to purchase shares in fiduciary's personal account.

A. If any fiduciary or agent purchases shares in a credit union in his own name (i) with share drafts or other instruments drawn by him upon an account in his own name as fiduciary, (ii) with share drafts or other instruments drawn by him upon an account in the name of his principal, if he is empowered to draw share drafts or other instruments thereto, or (iii) with share drafts or other instruments payable to his principal and endorsed by him as fiduciary, the credit union issuing such shares shall not be bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary.

B. The credit union is authorized to pay the amount of the shares issued or any part thereof upon the withdrawal by the fiduciary without being liable to the principal, unless the credit union receives payment for the shares or pays the withdrawal (i) with the actual knowledge that the fiduciary, in purchasing such shares or in making such withdrawal, is committing a breach of his obligation as a fiduciary, or (ii) with knowledge of such facts that its action in issuing the shares or paying the withdrawal amounts to bad faith.

2000, c. 744, § 6.1-225.50:2; 2010, c. 794.

Article 9 - LOANS AND INVESTMENTS

§ 6.2-1370. Purpose and condition of loans.

A credit union may lend to its members for such purposes and upon such conditions as the bylaws may prescribe. The board of directors shall establish written policies with respect to granting loans and extending lines of credit, including the terms, conditions, and acceptable forms of security.

Code 1950, § 6-207; 1956, c. 90; 1966, c. 584, § 6.1-198; 1968, c. 560; 1980, c. 181; 1983, c. 300; 1990, c. 373, § 6.1-225.51; 2010, c. 794.

§ 6.2-1371. Other charges.

A. In addition to interest charged on loans, a credit union may charge members all reasonable expenses in connection with making, closing, disbursing, extending, collecting, or renewing loans.

B. In accordance with the bylaws, a credit union may assess charges to members for failure to meet in a timely manner their obligations to the credit union.

1990, c. 373, § 6.1-225.52; 2010, c. 794.

§ 6.2-1372. Loan limits.

A. No loan may be made by a credit union to a member if, upon making the loan, the member would be indebted to the credit union on loans to such member in an aggregate amount which would exceed the lesser of (i) 10 percent of the credit union's share accounts and reserve fund or (ii) the maximum amount as authorized by its bylaws.

B. The aggregate amount of a credit union's "member business loans," as defined in 12 C.F.R. § 701.21 (h), shall not exceed the limit prescribed for insured credit unions by subsection (a) of § 107A of the Federal Credit Union Act (12 U.S.C. § 1757a), taking into account also the provisions of subsections (b) through (d) of that section.

Code 1950, § 6-226; 1956, c. 90; 1966, c. 584, § 6.1-217; 1968, c. 560; 1972, c. 192; 1975, c. 448; 1979, c. 139; 1987, c. 150; 1990, c. 373, § 6.1-225.53; 1999, c. 63; 2010, c. 794.

§ 6.2-1373. Loans to members of credit committee; nonmember loans.

A. If the borrower or endorser on a loan by a credit union is a member of the credit committee, or a member of the board of directors if the board is serving as the credit committee, the loan shall be approved by the supervisory committee or a loan officer instead of by the credit committee. If the loan is fully secured by shares, such loan may be approved by the credit committee.

B. No loan shall be made to an individual or entity that is not a member of the credit union. If the credit committee or loan officer should knowingly approve such a loan, the members of the credit committee shall be jointly and severally liable, or in the case of a loan officer, he shall be individually liable, to the credit union for the immediate repayment thereof.

Code 1950, § 6-226; 1956, c. 90; 1966, c. 584, § 6.1-217; 1968, c. 560; 1972, c. 192; 1975, c. 448; 1979, c. 139; 1987, c. 150; 1990, c. 373, § 6.1-225.54; 2010, c. 794.

§ 6.2-1374. Lines of credit.

Notwithstanding the requirements of § 6.2-1354, the credit committee or a loan officer may approve an application for a line of credit. When a line of credit has been approved, advances may be made as requested without further loan application or approval if the aggregate outstanding balance on all advances does not exceed the limit specified.

1976, c. 204, § 6.1-212.1; 1986, c. 147; 1990, c. 373, § 6.1-225.55; 2010, c. 794.

§ 6.2-1375. Cooperative loans.

A credit union may originate loans to credit union members jointly with other credit unions, credit union organizations, or other financial institutions pursuant to written policies established by the board of directors. The policies shall include the limitation set forth in § 6.2-1372. A credit union that originates such a loan shall retain at least a 10 percent interest in such loan.

1990, c. 373, § 6.1-225.56; 2010, c. 794.

§ 6.2-1376. Authorized investments.

The funds of a credit union that are not used in loans to members may be invested only:

1. In loans to other insured credit unions to the extent permitted in the bylaws;

2. In shares, share accounts, or deposits of other insured credit unions to the extent authorized in its bylaws, but not to exceed 25 percent of the investing credit union's outstanding shares and reserve fund;

3. Notwithstanding any other provision of this section, in shares or deposits of any corporate credit union provided such investments are specifically authorized by the board of directors making the investment;

4. In federally insured banks and savings institutions;

5. In the capital stock of the National Credit Union Central Liquidity Facility or any central liquidity facility established under the laws of the Commonwealth;

6. In obligations of the United States and securities fully guaranteed as to principal and interest thereby;

7. In obligations of the Commonwealth and any political subdivision thereof, including, but not limited to, revenue bonds;

8. In such stock, securities, obligations, or other investments as may be approved from time to time by the Commission;

9. In real estate, office buildings, equipment, and furnishings of the credit union, provided that the aggregate investment in all such fixed assets shall not exceed five percent of the total of the members' share accounts and retained earnings without the prior written authorization of the Commissioner;

10. In shares, stock, deposits in, loans, or other obligations of any credit union service organization, corporation, or association, if (i) the membership or ownership, as the case may be, of such organization, corporation, or association is primarily confined or restricted to credit unions or organizations of credit unions and (ii) the purpose for which such organization, corporation, or association is organized is to strengthen or advance the development of credit unions or credit union organizations. Such investment by any credit union shall not exceed five percent of the credit union's outstanding shares and reserves without the prior approval of the Commissioner;

11. In deposits in, loans to, or shares of any Federal Reserve Bank; and

12. In cooperative loans with other credit unions or credit union organizations. Such investment shall not exceed 10 percent of outstanding shares and reserves of the investing credit union.

Code 1950, § 6-225; 1956, c. 90; 1958, c. 21; 1966, c. 584, § 6.1-216; 1968, c. 560; 1972, c. 192; 1974, c. 117; 1975, c. 35; 1979, c. 190; 1980, cc. 207, 210; 1983, c. 466; 1984, c. 351; 1990, c. 373, § 6.1-225.57; 1991, c. 367; 2010, c. 794; 2013, cc. 16, 92.

Article 10 - RESERVES

§ 6.2-1377. Maintenance of regular reserves; special reserves.

A. A credit union shall establish and maintain a regular reserve account in accordance with the applicable provisions of Part 702 of the National Credit Union Administration Rules and Regulations, 12 C.F.R. §§ 702.1 through 702.403.

B. The Commission may increase or decrease the reserve requirement when in its opinion such an increase or decrease is necessary or desirable.

C. In addition to such regular reserve, special reserves shall be established when found by the board of directors of the credit union or by the Commission to be necessary to protect the interest of members.

D. Unless otherwise prohibited by the Commission, the board of directors of a credit union may establish the regular reserve in an amount in excess of that required by this section when in its opinion the increased amount is necessary or desirable.

Code 1950, § 6-227; 1964, c. 75; 1966, c. 584, § 6.1-218; 1968, c. 560; 1984, c. 410; 1986, c. 146; 1990, c. 373, § 6.1-225.58; 2002, c. 261; 2010, c. 794.

§ 6.2-1378. Use of reserves.

Losses may be charged to the reserve fund. Any sums recovered on items previously charged to it shall be credited to the reserve fund. No dividends shall be paid out of the reserve fund unless the fund, after such payment, exceeds the total amount required to be set aside in the regular reserve and special reserves of the credit union.

Code 1950, § 6-227; 1964, c. 75; 1966, c. 584, § 6.1-218; 1968, c. 560; 1984, c. 410; 1986, c. 146; 1990, c. 373, § 6.1-225.59; 2010, c. 794.

Article 11 - OUT-OF-STATE CREDIT UNIONS

§ 6.2-1379. Out-of-state credit unions.

A. A credit union organized and doing business in another state may conduct business as a credit union in the Commonwealth with the approval of the Commission. The Commission shall grant such approval if it shall find that the out-of-state credit union:

1. Is a credit union duly organized under the laws of another state that would allow credit unions organized in the Commonwealth to conduct business in that state;

2. Has share insurance for its members;

3. Reasonably needs to establish a place of business in the Commonwealth to adequately serve its members in the Commonwealth;

4. Is examined and supervised by the supervisory authority of the state in which the out-of-state credit union is organized; and

5. Has filed an application with the Commission to conduct such business.

B. The out-of-state credit union shall:

1. Grant loans at rates of interest not in excess of the rates permitted for credit unions organized under the laws of the Commonwealth;

2. Comply with the same consumer protection provisions that credit unions organized under the laws of the Commonwealth are required to obey;

3. Designate and maintain a registered agent in the Commonwealth;

4. Submit all examination reports from its supervisory agency to the Commission;

5. Have any insurer of shares designate an agent for service of process and agree that in the absence of such designation service may be upon the clerk of the Commission;

6. Inform the members of the credit union who use any facility authorized pursuant to this section of the state where the organization, supervision, and share insurance of the credit union are, and of the fact that it is not regulated, supervised, or insured by any agency of the Commonwealth; and

7. Comply with § 6.2-1326.

C. Credit unions organized in the Commonwealth may establish offices outside the Commonwealth upon approval of the Commission.

D. The Commission may suspend or revoke the authority of an out-of-state credit union to do business in the Commonwealth if the Commission finds that such credit union is not in compliance with the requirements of this section.

1985, c. 552, § 6.1-208.6; 1990, c. 373, § 6.1-225.61; 1993, c. 59; 2010, c. 794.

§ 6.2-1380. Examinations; periodic reports; cooperative agreements; assessment of fees.

A. The Commission may make such examinations of an out-of-state credit union conducting business in the Commonwealth pursuant to § 6.2-1379 as the Commission may deem necessary to determine whether the credit union is operating in compliance with the laws of the Commonwealth or to ensure that any office or facility of the out-of-state credit union is being operated in a safe and sound manner. The provisions of § 6.2-1309 shall apply to such examinations.

B. The Commission shall require periodic reports from any out-of-state credit union that so conducts business in the Commonwealth. Such reports shall be filed under oath with such frequency and in such scope and detail as may be appropriate for the purpose of assuring continuing compliance with the provisions of this chapter.

C. The Commission may enter into cooperative agreements with appropriate state credit union supervisors and federal credit union agencies for the examination of any office or facility in the Commonwealth of an out-of-state credit union, or any office or facility of a Virginia credit union in any host state, and may accept such supervisors' and agencies' reports of examination and reports of investigation in lieu of conducting its own examinations or investigations. The Commission may enter into joint actions with other state credit union supervisors and federal agencies having concurrent jurisdiction over any such out-of-state credit union or any branch of a Virginia credit union, or may take such actions independently to carry out its responsibilities under this article and to assure compliance with the laws of the Commonwealth.

D. Out-of-state credit unions may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of the Commonwealth and regulations of the Commission. Such fees may be shared with other state and federal regulators and agencies in accordance with agreements between them and the Commission.

1998, c. 23, § 6.1-225.61:1; 2010, c. 794.

Subtitle III - OTHER REGULATED PROVIDERS OF FINANCIAL SERVICES

Chapter 14 - INDUSTRIAL LOAN ASSOCIATIONS

§ 6.2-1400. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Affiliated person of an association" means any person which is a subsidiary, stockholder, partner, trustee, director, officer, or employee of an association, and any corporation 10 percent or more of the capital stock of which is owned by an association or by any person which is a subsidiary, stockholder, partner, trustee, director, officer, or employee of an association.

"Association" means a corporation organized as an industrial loan association under the provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.), the business of which is substantially confined to the business of making loans and issuing certificates of investment.

"Mortgage loan" means a loan made to an individual, the proceeds of which are to be used primarily for personal, family or household purposes, which loan is secured by a mortgage or deed of trust upon any interest in one- to four-family residential property located in the Commonwealth, regardless of where made, including the renewal or refinancing of any such loan, but excluding (i) loans or extensions of credit to buyers of real property for any part of the purchase price of such property by persons selling such property owned by them, (ii) loans to persons related to the lender by blood or marriage, and (iii) loans to persons who are bona fide employees of the lender. "Mortgage loan" shall not include any loan secured by a mortgage or deed of trust upon any interest in a more than four-family residential property or property used for a commercial or agricultural purpose.

2010, c. 794.

§ 6.2-1401. Powers of associations.

Associations shall have all the general powers and be subject to all the restrictions contained in the Virginia Stock Corporation Act (§ 13.1-601 et seq.), except as herein otherwise provided. An association need not comply with the provisions of subsection A of § 13.1-630.

Code 1950, §§ 6-242, 6-244; 1956, c. 433; 1958, c. 139; 1966, c. 584, § 6.1-227; 2010, c. 794.

§ 6.2-1402. Use of certain words in name prohibited.

An association shall neither use in its corporate name nor do business under a name containing the word "bank," "savings bank," "banker," "trust company," "trust," or other word of similar import.

Code 1950, §§ 6-242, 6-244; 1956, c. 433; 1958, c. 139; 1966, c. 584, § 6.1-227; 2010, c. 794.

§ 6.2-1403. Directors.

A. Every association shall have at least five directors, each of whom shall own in his own right and have in his personal possession or control shares of stock in the association that (i) have in the aggregate at least $100 in par value, and (ii) shall be unpledged and unencumbered at the time he became a director and during his entire term as director.

B. Each director shall take and subscribe an oath that he will (i) comply with the requirements of subsection A regarding his stock of the association and (ii) diligently and honestly administer the affairs of the association as its director. The oath shall be transmitted to the Commission within 60 days following his election.

C. Any director violating the provisions of this section shall thereby vacate his office. The remaining directors shall proceed forthwith to fill such vacancy.

D. The directors shall require all active officers of such association to provide bonds in such sums as may be prescribed by the Commission in a surety company authorized to do business in the Commonwealth.

Code 1950, § 6-252; 1966, c. 584, § 6.1-235; 2010, c. 794.

§ 6.2-1404. Commission may regulate issuance of evidences of debt.

The Commission may by regulation prescribe the terms and conditions upon which an association may issue bonds, debentures, or other evidences of debt, however described, that are offered to the public by advertisement or solicitation.

1974, c. 174, § 6.1-227.1; 2010, c. 794.

§ 6.2-1405. Extent to which associations regarded as banks; conversion of certain associations to banks; new associations not authorized.

A. An association incorporated after July 1, 1960, shall have all the powers conferred on banks, shall be subject to all restrictions applicable to banks, and shall for the purposes of state supervision and control be banks.

B. An association that had certificates of investment issued and outstanding on January 1, 1959, may become a bank upon complying with all the provisions of Chapter 8 (§ 6.2-800 et seq.).

C. Any person who has not obtained authorization from the Commission to do business as an association prior to October 1, 2010, shall not conduct business as an association.

Code 1950, §§ 6-245, 6-250; 1956, c. 433; 1960, c. 62; 1966, c. 584, §§ 6.1-228, 6.1-230; 2010, c. 794.

§ 6.2-1406. Sale of certificates of investment by certain associations prohibited.

A. An association that had no certificates of investment issued and outstanding on January 1, 1959, may not sell certificates of investment.

B. An association that had certificates of investment issued and outstanding on January 1, 1959, may sell certificates of investment upon either the fully paid or partial payment system. Any such association that did not obtain insurance of its liability for such certificates, through either a state or federal agency, up to the limits of insurance provided thereby prior to July 1, 1975, shall not sell such certificates after such date.

Code 1950, § 6-255; 1960, c. 63; 1966, c. 584, §§ 6.1-229, 6.1-231; 1974, c. 176; 2010, c. 794.

§ 6.2-1407. Prohibitions on associations with certificates issued and outstanding; advertisements.

A. An association that has certificates of investment issued and outstanding shall not:

1. Advertise that it carries insurance unless its certificates of investment are insured or guaranteed by a state or federal agency;

2. Own any shares of stock issued by any other corporation except to the extent legal for banks;

3. Invest more than 80 percent of the amount of its outstanding certificates of investment in loans secured by liens on real estate;

4. Make any loan secured by liens on real estate in excess of that percent of the appraised value permitted to banks;

5. Issue certificates of investment for the purpose of borrowing money from financial institutions; or

6. Issue a certificate of investment paying a higher rate of interest than four and one-half percent per annum, except that notwithstanding this limitation it may pay at any time an interest rate equal to the highest rate paid by any state savings institution or bank located in the same community in the Commonwealth.

B. An association that has certificates of investment issued and outstanding shall place in a prominent manner in every advertisement for, and upon any document evidencing ownership of, certificates of investment that are not insured by a state or federal agency the words: "The savings accounts in this association are not insured."

Code 1950, § 6-251; 1956, c. 433; 1960, c. 64; 1966, c. 584, § 6.1-232; 1974, cc. 175, 176, § 6.1-232.1; 1978, c. 14; 1996, c. 16; 2010, c. 794.

§ 6.2-1408. Associations to have one office; how office moved.

An association shall not have more than one office for the conduct of its business. An association shall not move its office without first satisfying the Commission that moving its office will promote the convenience of its customers.

1966, c. 584, § 6.1-233; 2010, c. 794.

§ 6.2-1409. Prepayment by borrower from association; rebates for unearned interest; prepayment penalty.

A. Any individual borrowing from an association shall have the right to anticipate payment of his debt at any time.

B. If interest has been added to the face amount of the note, the borrower shall have the right, upon prepayment of the debt, to receive a rebate by way of credit for any unearned interest. The rebate shall be computed:

1. On loans (i) with an initial maturity and corresponding amortization period of 61 months or less and (ii) payable in equal periodic installments, in accordance with the Rule of 78 as illustrated in § 6.2-403 or by using any other method that is at least as favorable to such borrower; and

2. On other loans, under a method at least as favorable to the borrower as the actuarial method.

C. An association may charge a prepayment penalty not to exceed two percent of the amount of the prepayment, provided such prepayment penalty, including the percent thereof, is set forth in the contract of indebtedness and is disclosed to the borrower pursuant to applicable federal interest disclosure laws.

1987, c. 622, § 6.1-330.84; 1990, c. 338; 1991, c. 171; 2010, c. 794.

§ 6.2-1410. Amount of loan.

No loan made by an association shall be made for a greater amount in the aggregate to any person than 20 percent of the paid-in capital stock and capital surplus of the association.

Code 1950, §§ 6-250, 6-253, 6-254; 1952, c. 70; 1956, c. 433; 1966, c. 584, § 6.1-234; 1968, c. 754; 1975, c. 448; 1981, c. 56; 2010, c. 794.

§ 6.2-1411. Retention of books, accounts, and records.

A. Every association shall maintain in its offices such books, accounts, and records as the Commission may reasonably require in order to determine whether such association is complying with the provisions of this chapter and regulations adopted in furtherance thereof. Such books, accounts, and records as relate to the mortgage lending or mortgage brokering business of the association shall be maintained separate from any other business in which the association is involved.

B. When acting as a mortgage lender, the association shall retain for at least three years after final payment is made on any mortgage loan or the mortgage loan is sold, whichever first occurs, copies of the note, settlement statement, Truth in Lending disclosure, and such other papers or records relating to the loan as may be required by regulation.

C. When acting as a mortgage broker, the association shall retain for at least three years after the mortgage loan is made the original contract for its compensation, a copy of the settlement statement, an account of fees received in connection with the loan, and such other papers and records as may be required by regulation.

1993, c. 419, § 6.1-237.1; 2010, c. 794.

§ 6.2-1412. Annual report.

Each association shall annually, on or before March 25, file a written report with the Commissioner containing such information as the Commissioner may require concerning its business and operations during the preceding calendar year. Reports shall be made under oath and be in the form prescribed by the Commissioner.

1993, c. 419, § 6.1-237.2; 2010, c. 794.

§ 6.2-1413. Investigations; examinations.

The Commission, as often as it deems necessary, may investigate and examine the affairs, business, premises, and records of any association. Examinations shall be conducted at least twice in each three-year period. In the course of such investigations and examinations, the owners, officers, directors, and employees of the association shall, upon demand of the person making such examination or investigation, afford full access to all premises, books, records, and information that the person making such examination or investigation deems necessary. For the purposes of this section, the person making such examination or investigation shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

1993, c. 419, § 6.1-237.3; 2010, c. 794.

§ 6.2-1414. Annual fees.

Each association shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the total assets of the individual associations, the actual costs of the associations' examination and other factors relating to their supervision and regulation. All such fees shall be assessed on or before July 1 for each calendar year and be paid by the associations to the State Treasurer on or before the July 31 following such assessment.

1993, c. 419, § 6.1-237.4; 2010, c. 794.

§ 6.2-1415. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard.

1993, c. 419, § 6.1-237.5; 2010, c. 794.

§ 6.2-1416. Prohibited practices.

A. No association shall:

1. Obtain any agreement or instrument in which blanks are left to be filled in after execution;

2. Take an interest in collateral other than the real estate or residential property, including fixtures and appliances thereon, securing a mortgage loan; however, an interest in collateral other than real estate may be taken if the real estate taken as collateral does not have sufficient equity to secure the mortgage loan;

3. Obtain any exclusive dealing or exclusive agency agreement from any borrower;

4. Delay closing of any mortgage loan for the purpose of increasing interest, costs, fees, or charges payable by the borrower;

5. Obtain any agreement or instrument executed by the borrower which contains an acceleration clause permitting the unpaid balance of a mortgage loan to be declared due for any reason other than failure to make timely payments of interest and principal or to perform other obligations undertaken in the agreement or instrument; or

6. If acting as a mortgage lender, fail to require the person closing the mortgage loan to provide the borrower, prior to closing of the mortgage loan, with a (i) settlement statement and (ii) disclosure which conforms to that required by the provisions of 15 U.S.C. § 1601 et seq. and Consumer Financial Protection Bureau Regulation Z (12 C.F.R. Part 1026).

B. No association, when acting as a mortgage broker, shall:

1. Except for documented costs of a credit report and appraisals, receive compensation from a borrower until a written commitment to make a mortgage loan is given to the borrower by a mortgage lender;

2. Receive compensation from a mortgage lender of which it is a principal, partner, trustee, director, officer, or employee;

3. Receive compensation from a borrower in connection with any mortgage loan transaction in which it is the lender or a principal, partner, trustee, director, or officer of the lender;

4. Receive compensation from a borrower other than that specified in a written agreement signed by the borrower; or

5. Receive compensation for negotiating, placing or finding a mortgage loan where such association, or any person affiliated with such association, has otherwise acted as a real estate broker, agent, or salesman in connection with the real estate which secures the mortgage loan, and such association or affiliated person has received or will receive any other compensation or thing of value from the lender, borrower, seller, or any other person, unless the borrower is given the following notice in writing at the time the mortgage broker services are first offered to the borrower:

NOTICE

WE HAVE OFFERED TO ASSIST YOU IN OBTAINING A MORTGAGE LOAN. IF WE ARE SUCCESSFUL IN OBTAINING A LOAN FOR YOU, WE WILL CHARGE AND COLLECT FROM YOU A FEE NOT TO EXCEED _____ % OF THE LOAN AMOUNT.

WE DO NOT REPRESENT ALL OF THE LENDERS IN THE MARKET AND THE LENDERS WE DO REPRESENT MAY NOT OFFER THE LOWEST INTEREST RATES OR BEST TERMS AVAILABLE TO YOU. YOU ARE FREE TO SEEK A LOAN WITHOUT OUR ASSISTANCE, IN WHICH EVENT YOU WILL NOT BE REQUIRED TO PAY US A FEE FOR THAT SERVICE.

IF YOU ARE A MEMBER OF A CREDIT UNION, YOU SHOULD COMPARE OUR INTEREST RATES AND TERMS WITH THE MORTGAGE LOANS AVAILABLE THROUGH YOUR CREDIT UNION.

______________________________
BORROWER'S SIGNATURE

______________________________
BORROWER'S SIGNATURE

The foregoing notice shall be in at least 10-point type, and the prospective borrower shall acknowledge receipt of the written notice.

1993, c. 419, § 6.1-237.6; 2010, c. 794; 2016, c. 501.

§ 6.2-1417. Escrow accounts.

All moneys required by an association to be paid by borrowers in escrow to defray future taxes or insurance premiums shall be kept in accounts segregated from accounts of the association and shall not be commingled with other funds of the association. No association shall require any borrower to pay any amounts in escrow to defray future taxes and insurance premiums in connection with a loan secured by a subordinate mortgage or deed of trust as defined in Chapter 3 (§ 6.2-300 et seq.), except where escrows for such purposes are not being maintained in connection with a mortgage loan superior to such subordinate mortgage loan.

1993, c. 419, § 6.1-237.7; 2010, c. 794.

§ 6.2-1418. Suspension or revocation of authority.

A. The Commission may suspend or revoke the authority of an association to do business upon any of the following grounds:

1. Any violation of the provisions of this chapter or regulations adopted by the Commission pursuant thereto, or a violation of any other law or regulation applicable to the conduct of its business;

2. A course of conduct consisting of failure to perform written agreements with borrowers;

3. Failure to account for funds received or disbursed to the satisfaction of the person supplying or receiving such funds;

4. Failure to disburse funds in accordance with any agreement connected with, and promptly upon closing of, a mortgage loan, taking into account any applicable right of rescission;

5. Conviction of any felony or misdemeanor involving fraud, misrepresentation, or deceit;

6. Entry of judgment against such association involving fraud, misrepresentation, or deceit;

7. Entry of a federal or state administrative order against such association for violation of any law or regulation applicable to the conduct of its business;

8. Refusal to permit an investigation or examination by the Commission;

9. Failure to pay any fee or assessment imposed by this chapter; or

10. Failure to comply with any order of the Commission.

B. For the purposes of this section, acts of any officer, director, or principal stockholder shall be deemed acts of the association.

1993, c. 419, § 6.1-237.8; 2010, c. 794.

§ 6.2-1419. Cease and desist orders.

If the Commission determines that any association has violated any provision of this chapter or any regulation adopted pursuant thereto, the Commission may, upon 21 days' notice in writing, order the association to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of the association and shall state the grounds for the contemplated action. Within 14 days of mailing the notice, the association may file with the clerk of the Commission a written request for a hearing. If a hearing is so requested, the Commission shall not issue a cease and desist order prior to such hearing. The Commission may enforce compliance with any such order by imposition and collection of such fines and penalties as may be prescribed by Commission regulations, or by revocation of the association's authority to do business in accordance with §§ 6.2-1418 and 6.2-1420.

1993, c. 419, § 6.1-237.9; 2010, c. 794.

§ 6.2-1420. Notice of proposed suspension or revocation.

The Commission may not revoke or suspend the authority of an association to do business upon any of the grounds set forth in § 6.2-1418 until it has given the association 21 days' notice in writing of the reasons for the proposed revocation or suspension and an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of the association and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the association may file with the clerk of the Commission a written request for a hearing. If a hearing is so requested, the Commission shall not suspend or revoke the association's authority to do business except based upon findings made at such hearing.

1993, c. 419, § 6.1-237.10; 2010, c. 794.

§ 6.2-1421. Civil penalties.

In addition to the authority conferred upon the Commission by other provisions of this chapter, the Commission may impose a civil penalty not exceeding $1,000 upon any association which it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter or regulations adopted pursuant thereto. For the purposes of this section, each separate violation shall constitute a separate offense.

1993, c. 419, § 6.1-237.11; 2010, c. 794.

Chapter 15 - Consumer Finance Companies

§ 6.2-1500. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Access partner" means a person that, at the person's physical location in the Commonwealth, facilitates the making and servicing of a loan through provision of some or all of the services described in § 6.2-1523.1 pursuant to a contract with a licensee. The term does not include (i) a person licensed under Chapter 25.1 (§ 59.1-335.1 et seq.) of Title 59.1; (ii) a person that is ineligible for licensure under § 6.2-1502 or to which this chapter shall not apply under § 6.2-1503; (iii) a person that has had any license revoked by the Commission at any time in the previous three years; (iv) a person that has violated or participated in the violation of § 6.2-1501 in the previous five years; or (v) a person who is licensed under Chapter 18 (§ 6.2-1800 et seq.) or Chapter 22 (§ 6.2-2200 et seq.).

"Arranging or brokering" means, with respect to consumer finance loans, negotiating, placing, or finding consumer finance loans for consumers, or offering to negotiate, place, or find consumer finance loans for consumers, in return for compensation paid directly by the consumers.

"Consumer finance company" means a person engaged in the business of making loans to individuals for personal, family, household, or other nonbusiness purposes.

"Licensee" means a consumer finance company to which a license has been issued by the Commission pursuant to this chapter.

"Principal" means any person who, directly or indirectly, owns or controls (i) 10 percent or more of the outstanding stock of a stock corporation or (ii) a 10 percent or greater interest in another person.

Code 1950, § 6-275; 1966, c. 584, § 6.1-245; 1978, c. 14; 2005, c. 63; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1501. Compliance with chapter; license required; attempts to evade application of chapter.

A. No person shall engage in the business of making loans to individuals for personal, family, household, or other nonbusiness purposes, and charge, contract for, or receive, directly or indirectly, on or in connection with any loan interest, charges, compensation, consideration, or expense that in the aggregate is greater than the interest permitted by § 6.2-303, whether or not the person has a location in the Commonwealth, except as provided in and authorized by this chapter, Chapter 18 (§ 6.2-1800 et seq.), or Chapter 22 (§ 6.2-2200 et seq.) and without first having obtained a license from the Commission.

B. Subject to subdivision C 3 and subsection C of § 6.2-1524, the prohibition in subsection A shall not be construed to prevent any person, other than a licensee, from:

1. Providing the services of an access partner described in § 6.2-1523.1;

2. Making a mortgage loan pursuant to §§ 6.2-325 and 6.2-326 or §§ 6.2-327 and 6.2-328 in any principal amount; or

3. Extending credit as described in § 6.2-312 in any amount.

C. The provisions of subsection A shall apply to any person who seeks to evade its application by any device, subterfuge, or pretense whatsoever, including:

1. The loan, forbearance, use, or sale of (i) credit, as guarantor, surety, endorser, comaker, or otherwise; (ii) money; (iii) goods; or (iv) things in action;

2. The use of collateral or related sales or purchases of goods or services, or agreements to sell or purchase, whether real or pretended; receiving or charging compensation for goods or services, whether or not sold, delivered, or provided; and

3. The real or pretended negotiation, arrangement, or procurement of a loan through any use or activity of a third person, whether real or fictitious.

D. No person shall engage in the business of arranging or brokering consumer finance loans for any consumer residing in the Commonwealth, whether or not the person has an office or conducts business at a location in the Commonwealth.

E. The provisions of this section shall apply to any person, whether or not the person has an office or conducts business at a location in the Commonwealth.

F. Any loan made in violation of this section is void, and no person shall have the right to collect, receive, or retain any principal, interest, fees, or other charges in connection with the loan.

Code 1950, §§ 6-279, 6-281; 1956, c. 71; 1966, c. 584, §§ 6.1-249, 6.1-251; 1968, c. 489; 1974, c. 371; 1986, c. 502; 1995, c. 2; 1998, c. 9; 2001, c. 308; 2002, c. 897; 2010, cc. 477, 794; 2020, cc. 1215, 1258.

§ 6.2-1502. Certain persons ineligible as licensees; exception for subsidiaries.

A. No person doing business under the authority of any law of the Commonwealth or of the United States relating to banks, savings institutions, trust companies, building and loan associations, industrial loan associations, or credit unions shall be eligible for licensure under this chapter.

B. Nothing contained in subsection A or any other section of this title shall be construed to prevent a subsidiary of a bank or savings institution from becoming a licensee under this chapter. A licensee that is a subsidiary or affiliate of a bank or savings institution shall be governed by the provisions of this chapter, and all regulations adopted hereunder, as fully as if such licensee were not such a subsidiary or affiliate.

Code 1950, § 6-280; 1966, c. 584, § 6.1-250; 1996, c. 16; 2000, c. 192; 2010, c. 794.

§ 6.2-1503. Scope of chapter.

This chapter shall not apply to:

1. Any business transacted by any person under the authority of and as permitted by any law of the Commonwealth or of the United States relating to banks, savings institutions, trust companies, building and loan associations, industrial loan associations, or credit unions;

2. Any bona fide pawnbroking business transacted under a pawnbroker's license; or

3. Any person operating in accordance with the specific provisions of any other provision of this title currently in effect or hereafter enacted.

Code 1950, § 6-280; 1966, c. 584, § 6.1-250; 1996, c. 16; 2000, c. 192; 2010, c. 794.

§ 6.2-1504. Restrictions on name.

No licensee shall use a firm, corporate, or assumed name that contains any of the words "savings," "trust," "trustee," "bank," "banker," "banking," "investment," "thrift," "building," or "industrial."

Code 1950, § 6-283; 1966, c. 584, § 6.1-253; 2010, c. 794.

§ 6.2-1505. Application for license; application fee.

A. Application for a license to make loans under this chapter shall be in writing, under oath, and in the form prescribed by the Commission.

B. The application shall contain:

1. The name and address of the applicant;

2. If the applicant is a partnership or association, the name and address of each partner or member of the partnership or association;

3. If the applicant is a corporation or limited liability company, the name and address of each senior officer, director, member, registered agent, and principal;

4. If the applicant is a business trust, the name and address of each trustee and beneficiary;

5. The addresses of the locations where the business is to be conducted; and

6. Such other information as may be required by the Commission.

C. The application shall be accompanied by payment of an application fee of $500.

Code 1950, § 6-284; 1966, c. 584, § 6.1-254; 1976, c. 658; 1981, c. 452; 1989, c. 239; 2005, c. 63; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1506. Investigation of application.

A. Upon the filing of the application and the payment of the application fee, the Commission shall make such investigation relative to the application and the requirements provided for in § 6.2-1507 as it deems appropriate.

B. The Commission shall grant or deny each application for a license within 60 days from the date the application, together with all required information and the application fee, is filed unless the period is extended by order of the Commission that recites the reasons for the extension.

Code 1950, § 6-285; 1956, c. 71; 1966, c. 584, § 6.1-255; 1989, c. 239; 2010, c. 794.

§ 6.2-1507. Issuance of license.

A. The Commission shall issue to the applicant a license to make loans in accordance with the provisions of this chapter if it finds:

1. That the financial responsibility, experience, character and general fitness of the applicant and its members, senior officers, directors, and principals are such as to command the confidence of the public and to warrant belief that this business will be operated lawfully, honestly, fairly and efficiently within the purpose of this chapter;

2. That the applicant has available, for the operation of the business, unencumbered liquid assets of at least $25,000 per location;

3. That the applicant has complied with all of the prerequisites to obtaining the license prescribed by § 6.2-1505; and

4. That the applicant will not make loans in accordance with the provisions of this chapter at the same location at which the applicant, its affiliate, or its subsidiary conducts business under either Chapter 18 (§ 6.2-1800 et seq.) or Chapter 22 (§ 6.2-2200 et seq.).

If the Commission fails to make the findings required by subdivisions 1, 2, 3, and 4, it shall deny the application for a license.

B. If the Commission denies an application for a license, it shall notify the applicant of the denial. The Commission shall retain the application fee.

Code 1950, § 6-287; 1966, c. 584, § 6.1-257; 1982, c. 79, § 6.1-256.1; 1995, c. 2; 2005, c. 63; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1508. Notices to Commission.

A. After receiving approval to conduct business at an additional location pursuant to subsection B of § 6.2-1507 or providing notice of relocation pursuant to § 6.2-1519, a licensee shall give written notice to the Commissioner within 10 days of the commencement of business at the additional location or relocated place of business.

B. Every licensee shall notify the Commissioner, in writing, within 10 days of (i) the closing of any business location, and (ii) the name, address and position of each new senior officer, member, partner, or director. The licensee also shall provide such other information with respect to any such event as the Commissioner may reasonably require.

1982, c. 79, § 6.1-256.1; 1995, c. 2; 2005, c. 63; 2010, c. 794.

§ 6.2-1508.1. Additional offices; relocation of offices.

A. No licensee shall open an additional office without prior approval of the Commission. Applications for such approval shall be made in writing on a form prescribed by the Commissioner and shall be accompanied by payment of a $150 nonrefundable application fee. The application shall be approved unless the Commission finds that the applicant does not have the required liquid assets or surety bond or has not conducted business under this chapter efficiently, fairly, in the public interest, and in accordance with the law. The application shall be deemed approved if notice to the contrary has not been sent by the Commission to the applicant within 30 days of the date the application is received by the Commission.

B. Prior approval of the Commission shall not be required in the event that a licensee needs to temporarily open an office due to a natural disaster or act of God. However, the licensee shall notify the Commission within 10 days of opening the office.

C. A licensee shall notify the Commission in writing within 10 days of relocating any approved office.

2020, cc. 1215, 1258.

§ 6.2-1509. Contents, posting, transfer, and duration of license.

A. Each license shall contain:

1. The address at which the business is to be conducted;

2. The full name of the licensee or, if the licensee is a partnership or association, the names of the partners or members; and

3. If the licensee is a corporation, the date and place of incorporation.

B. The licensee shall post the license prominently in each approved place of business of the licensee. The licensee shall prominently disclose on its website the license number assigned by the Commission to the licensee.

C. The license shall not be transferable or assignable.

D. Each license shall remain in full force and effect until surrendered, revoked, or suspended as provided by this chapter or by lawful order of the Commission.

Code 1950, §§ 6-288, 6-289; 1966, c. 584, §§ 6.1-258, 6.1-259; 1980, c. 211; 1982, c. 609; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1510. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire, directly or indirectly, 25 percent or more of the voting shares of a corporation, or 25 percent or more of the ownership of any other person, licensed to conduct business under this chapter unless such person first:

1. Files an application with the Commission in such form as the Commissioner may prescribe from time to time;

2. Delivers such other information to the Commissioner as the Commissioner may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, principals, and members, and of any proposed new directors, senior officers, principals, or members of the licensee; and

3. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant, its members if applicable, its directors, senior officers, and principals, and any proposed new directors, members, senior officers, and principals have the financial responsibility, character, reputation, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by order of the Commissioner reciting the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

C. The provisions of this section shall not apply to (i) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person licensed by this chapter, (ii) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person affiliated through common ownership with the licensee, or (iii) the acquisition of an interest in a licensee by a person by bequest, descent, survivorship or operation of law. The person acquiring an interest in a licensee in a transaction that is exempt from filing an application by this subsection shall send written notice to the Commissioner of such acquisition within 30 days of its closing.

2005, c. 63, § 6.1-258.1; 2010, c. 794.

§ 6.2-1511. Revocation of license.

The Commission, upon 10 days' written notice to the licensee stating the contemplated action and in general the grounds therefor, and upon reasonable opportunity to be heard, may revoke any license issued hereunder if it finds that:

1. The licensee has failed to pay the annual fee assessed pursuant to § 6.2-1532 or to comply with any order of the Commission lawfully made pursuant to and within the authority of this chapter;

2. The licensee, either knowingly or without the exercise of due care to prevent the same, has violated any provision of this chapter or any regulation lawfully made by the Commission under § 6.2-1535; or

3. Any fact or condition exists that clearly would have warranted the Commission to refuse originally to issue the license.

Code 1950, § 6-290; 1956, c. 71; 1966, c. 584, § 6.1-260; 2010, c. 794.

§ 6.2-1512. Suspension of license.

If the Commission finds that probable cause for revocation of any license exists and that enforcement of the law requires immediate suspension of the license pending investigation, it may, upon three days' written notice and a hearing, by the Commission or by the Commissioner, enter an order suspending the license for a period not exceeding 30 days.

Code 1950, § 6-291; 1966, c. 584, § 6.1-261; 2010, c. 794.

§ 6.2-1513. Record and notice of revocation or suspension.

Whenever the Commission revokes or suspends a license issued pursuant to this chapter, it shall:

1. Enter an order to that effect, which order shall set forth its findings;

2. Compile a record containing (i) a summary of the evidence, (ii) the findings with respect thereto, (iii) the order, and (iv) the reasons supporting the revocation or suspension; and

3. Serve a copy of the order upon the licensee.

Code 1950, § 6-292; 1966, c. 584, § 6.1-262; 2010, c. 794.

§ 6.2-1514. Surrender of license.

Any licensee may surrender any license by delivering it to the Commission with written notice of its surrender. The surrender shall not affect the licensee's civil or criminal liability for acts previously committed.

Code 1950, § 6-293; 1966, c. 584, § 6.1-263; 2010, c. 794.

§ 6.2-1515. Effect of license revocation, suspension, or surrender.

The revocation, suspension, or surrender of any license shall not impair or affect the obligation of any preexisting lawful contract between the licensee and any borrower.

Code 1950, § 6-294; 1966, c. 584, § 6.1-264; 2010, c. 794.

§ 6.2-1516. Reinstatement of license.

The Commission may reinstate any suspended license, or issue a new license to a person any license of whom has been revoked, if no fact or condition then exists that clearly would have warranted the Commission to refuse originally to issue a license under this chapter.

Code 1950, § 6-295; 1966, c. 584, § 6.1-265; 2010, c. 794.

§ 6.2-1517. Place of business generally.

A licensee shall not use any name other than the legal name or fictitious name set forth on the license issued by the Commission. No licensee shall conduct the business of making loans provided for by this chapter within any place of business other than is designated in the license issued by the Commission.

Code 1950, §§ 6-296, 6-298; 1966, c. 584, §§ 6.1-266, 6.1-268; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1518. Notice of conduct of other business in same place of business; fee.

A. A licensee shall not conduct the business of making loans under this chapter within any office, suite, room, or other place of business in which any other business is solicited or engaged in, or in association or conjunction with any other business, unless the licensee has first given 30 days' written notice to the Commission. Every notice shall be accompanied by a fee of $300.

B. Upon receipt of such notice and fee, the Commission may require the licensee to provide information relating to the other business, including how and by whom it will be conducted. The Commission shall have the authority to investigate the conduct of such other businesses in the licensee's place of business.

C. The provisions of this section shall not affect (i) any regulations adopted by the Commission prior to July 1, 2000, governing the conduct of other businesses in the place of business designated in a license or (ii) the authority of the Commission to adopt such regulations as the Commission deems necessary.

D. If the Commission finds that the other business (i) is of such a nature or is being conducted in such a manner as to conceal or facilitate a violation or evasion of the provisions of this chapter or regulations adopted pursuant to it; (ii) is contrary to the public interest; or (iii) is otherwise being conducted in an unlawful manner, the Commission may, after notice to the licensee and an opportunity for a hearing, prohibit or limit the conduct of such other business in the place of business designated in the license.

E. Any authority granted under this section shall remain in full force and effect until surrendered, or until revoked or suspended by the Commission as provided in this chapter or by lawful order of the Commission.

F. A licensee that conducts the business of making loans pursuant to this chapter solely over the Internet shall not offer, sell, or make available any other products or services to Virginia residents, except as permitted by Commission regulation or upon approval of a written application with the Commission, payment of a fee of $300, and provision of such information as the Commission may deem pertinent.

G. This section shall not apply to any other business that is transacted solely with persons residing outside the Commonwealth.

Code 1950, § 6-297; 1966, c. 584, § 6.1-267; 1981, c. 452, § 6.1-267.1; 1982, c. 609; 2000, c. 192; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1519. Changing place of business.

A. A licensee may change its place of business to a different location in the Commonwealth if the new location is:

1. Within the original locality; or

2. From the original locality to a location in a contiguous locality.

B. A licensee shall notify the Commission of a change in the place of business within 10 days of such relocation. Upon receipt of the notification, the Commission shall issue and deliver to the licensee an amended license covering the new location if it finds that the change in the place of business meets one of the criteria listed in subsection A. Each notice of change of location under this section shall be accompanied by a fee of $250.

1982, c. 78, § 6.1-269.1; 1988, c. 147; 2000, c. 192; 2010, c. 794.

§ 6.2-1520. Rate of interest; late charges; processing fees.

A. A licensee may make installment loans of between $300 and $35,000, which loans shall have a term of no fewer than six months and no more than 120 months and shall be repayable in at least six substantially equal consecutive payments. A licensee may charge and collect interest on a loan made under this chapter at a single annual rate not to exceed 36 percent. Interest shall not be charged on an add-on basis and shall not be compounded but shall be computed and paid only as a percentage of the unpaid principal balance. Interest shall be computed on the basis of the number of days elapsed; however, if part or all of the consideration for a loan contract is the unpaid principal balance of a prior loan, then the principal amount payable under the loan contract may include any unpaid interest on the prior loan that has accrued within 90 days before the making of the new loan contract. For the purpose of computing interest, a day may equal 1/360th or 1/365th of a year.

B. A licensee may charge a late payment fee of $20 for any payment or portion of a payment not received and applied within 10 days of the contractual due date. For purposes of this section, a late payment fee for any individual scheduled contractual payment due may be assessed only once. The late payment fee shall be specified in the contract between the lender and the borrower.

C. A licensee may charge a loan processing fee not to exceed the greater of $50 or six percent of the principal amount of the loan, provided that the loan processing fee shall in no event exceed $150. The loan processing fee shall be stated in the loan contract. The loan processing fee shall not be deemed to constitute interest charged on the principal amount of the loan for purposes of determining whether the interest charged exceeds the 36 percent annual contract interest rate limitation imposed by subsection A. Upon payment of the full amount of principal due plus accrued interest and any other applicable fees within the first 30 days, whether through outside funds or a refinancing under a new loan advance, the borrower shall be entitled to a full rebate of the loan processing fee less an amount not to exceed $50 or the actual loan processing fee, whichever is less. If a loan is refinanced or renewed, a licensee may assess an additional loan processing fee on the loan no more than once during any 12-month period.

D. A licensee may collect from the borrower the amount of any actual fees necessary to file, record, or release its security interest with any public official or agency of a locality or the Commonwealth as may be required by law.

1995, c. 2, § 6.1-272.1; 2001, c. 308; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1521. Post-judgment charges.

If judgment is obtained against any party on any loan made under the provisions of this chapter, neither the judgment nor the loan shall carry, from the date of the judgment, any charges against any party to the loan other than court costs, attorney fees, and interest on the amount of the judgment at the rate fixed by § 6.2-302.

Code 1950, § 6-603; 1966, c. 584, § 6.1-273; 1975, c. 270; 1987, c. 196; 2010, c. 794.

§ 6.2-1522. Other limitations on interest.

A. Any loan made under the provisions of this chapter that is properly scheduled in a bankruptcy proceeding shall bear interest against any party to the loan from 90 days after the date of adjudication, whether there is an ultimate discharge or an extension, if any interest is allowable at all, at six percent per year. This limitation shall not apply (i) to a comaker not currently in bankruptcy when the bankrupt is not entitled to a discharge, or (ii) if the particular obligation is not dischargeable under the provisions of Title 11 of the United States Code.

B. After 90 days from the date of the death of the borrower, no other charges than interest at six percent per year shall be computed or collected from any party to the loan upon the unpaid principal balance of the loan.

C. For the period beginning six months after the date of maturity, as originally scheduled or as deferred in the event of deferment, of any loan contract under the provisions of this chapter, no further charges than interest at six percent per year shall be computed or collected from any party to the loan upon the unpaid balance of the loan.

Code 1950, §§ 6-304, 6-305, 6-306; 1966, c. 584, §§ 6.1-274, 6.1-275, 6.1-276; 1968, c. 489; 1987, c. 410; 2010, c. 794.

§ 6.2-1523. Additional charges prohibited; exceptions.

In addition to the interest, late payment fees, and loan processing fee permitted under § 6.2-1520, no further or other amount whatsoever for any examination service, brokerage, commission, fine, notarial fee, or other thing or otherwise shall be directly or indirectly charged, contracted for, collected, or received, except:

1. Insurance premiums actually paid out by the licensee to any insurance company or agent duly authorized to do business in the Commonwealth or another state for insurance for the protection and benefit of the borrower written in connection with any loan;

2. The actual cost of recordation fees or, on loans over $100, the amount of the lawful premiums, no greater than such fees, actually paid for insurance against the risk of not recording any instrument securing the loan; and

3. A handling fee not to exceed $25 for each check returned to the licensee because the drawer had no account or insufficient funds in the payor bank.

Code 1950, § 6-308; 1966, c. 584, § 6.1-278; 1978, c. 625; 1981, cc. 37, 38; 1984, c. 296; 1986, c. 502; 1990, c. 751; 1995, c. 2; 2001, c. 308; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1523.1. Access partners.

A. Notwithstanding the provisions of §§ 6.2-1501 and 6.2-1518, a licensee may use the services of one or more access partners, provided that all of the following conditions are met:

1. All loans made in connection with an access partner comply with the requirements of this chapter.

2. The licensee maintains a written agreement with each access partner. The written agreement shall (i) require the access partner to comply with this section and all rules adopted under this section regarding the activities of access partners; (ii) give the Commission access to the access partner's books and records pertaining to the access partner's operations under the agreement with the licensee in accordance with § 6.2-1533 and authority to examine the access partner pursuant to § 6.2-1531; (iii) prohibit the access partner from charging or accepting any fees or compensation in connection with a loan from any person, other than what the licensee pays to the access partner under the terms of the contract; and (iv) require the access partner to keep written records sufficient to ensure compliance with this chapter, including records of all loan disbursements and loan payments for at least three years.

3. A licensee shall conduct a due diligence review of all access partners. The due diligence shall include a review of the access partner's financial soundness and legal compliance and the criminal history of the access partner and its employees. A licensee shall be responsible for implementing and maintaining a reasonable risk-based supervision program to monitor its access partners. The licensee shall provide to the Commission any information relating to the access partners as the Commissioner prescribes. Such information shall be provided in a form and manner as prescribed by the Commissioner.

4. The services of an access partner shall be limited to (i) distributing written materials or providing written factual information about loans that has been prepared or authorized in writing by the licensee; (ii) explaining the loan application process to prospective borrowers or assisting applicants to complete a loan application according to procedures the licensee approves; (iii) processing credit applications provided by the licensee, which applications shall clearly state that the licensee is the lender and disclose the licensee's contact information and how to submit complaints to the Commission; (iv) communicating with the licensee or the applicant about the status of applications; (v) obtaining the borrower's signature on documents prepared by the licensee and delivering final documents to the borrower; (vi) disbursing loan proceeds or receiving loan payments, provided the access partner provides a plain and complete written receipt at the time each disbursement or payment is made; and (vii) operating electronic access points through which a prospective borrower may directly access the website of the licensee to apply for a loan.

5. An access partner shall not (i) provide counseling or advice to a borrower or prospective borrower with respect to any loan term; (ii) provide loan-related marketing material that has not previously been approved by the licensee; (iii) negotiate a loan term between a licensee and a prospective borrower; (iv) offer information pertaining to a single prospective borrower to more than one licensee, except that if a licensee has declined to offer a loan to a prospective borrower in writing the access partner may offer information pertaining to that borrower to another licensee with whom it has an access partner agreement; or (v) offer information pertaining to any prospective borrower to any person or entity other than a licensee operating under this chapter, subject to clause (iv).

6. A licensee shall apply any payment a borrower makes to an access partner as of the date on which the payment is received by the access partner.

7. A licensee shall not (i) hold a borrower liable for a failure or delay by an access partner in transmitting a payment to the licensee; (ii) knowingly conduct business with an access partner that has solicited or accepted fees or compensation in connection with a licensee's loan other than what is specified in the written agreement described in subdivision 2; or (iii) directly or indirectly pass on to a borrower any fee or other compensation that a licensee pays to an access partner in connection with such borrower's loan.

B. A licensee shall be responsible for any act of its access partner if such act would violate any provision of this chapter.

C. The Commission may (i) bar a licensee that violates any part of this chapter from using the services of specified access partners, or access partners generally; (ii) subject a licensee to disciplinary action for any violation of this chapter committed by a contracted access partner; or (iii) bar any person who violates the requirements of this chapter from performing services pursuant to this chapter generally or at particular locations.

D. The Commission shall have the authority to conduct investigation and examination of access partners, provided the scope of any investigation or examination shall be limited to those books, accounts, records, documents, materials, and matters reasonably necessary to determine compliance with this chapter.

E. An access partner location shall not be considered an office for purposes of § 6.2-1508.1.

F. An access partner shall not be required to be licensed under Chapter 19 (§ 6.2-1900 et seq.) to provide the services of an access partner described in subdivision A 4.

2020, cc. 1215, 1258.

§ 6.2-1523.2. Application of chapter to Internet loans.

A. The provisions of this chapter, including specifically the licensure requirements of § 6.2-1501, shall apply to persons making loans over the Internet to Virginia residents or any individuals in Virginia, whether or not the person maintains a physical presence in the Commonwealth.

B. The Commission may, from time to time, by administrative rule or policy statement, set requirements that the Commission reasonably deems necessary to ensure compliance with this section.

2020, cc. 1215, 1258.

§ 6.2-1523.3. Bond required.

An application for a license under this chapter shall be accompanied by a bond filed with the Commissioner with corporate surety authorized to execute such bond in the Commonwealth, in the sum of $25,000, or such greater sum as the Commission may require, but not to exceed a total of $500,000. The form of such bond shall be approved by the Commission. Such bond shall be continuously maintained thereafter in full force. Such bond shall be conditioned upon the applicant or licensee performing all written agreements with borrowers or prospective borrowers, correctly and accurately accounting for all funds received by it in its licensed business, and conducting its licensed business in conformity with this chapter and all applicable laws. Any person who may be damaged by noncompliance of the licensee with any condition of such bond may proceed on such bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

2020, cc. 1215, 1258.

§ 6.2-1524. (Effective until January 1, 2024) Required and prohibited activities and conduct.

A. Each licensee shall maintain at all times the minimum unencumbered liquid assets prescribed by § 6.2-1507.

B. A licensee or other person subject to this chapter shall not advertise, display, distribute or broadcast, or cause or permit to be advertised, displayed, distributed or broadcast, in any manner whatsoever, any false, misleading, or deceptive statement or representation with regard to the rates, terms, or conditions for loans made under this chapter. The Commission may require that charges or rates of charge, if stated by a licensee, be stated fully and clearly in such manner as it deems necessary to prevent misunderstanding by prospective borrowers. The Commission may permit or require licensees to refer in their advertising to the fact that their business is under state supervision, subject to conditions imposed by it to prevent false, misleading, or deceptive impression as to the scope or degree of protection provided by this chapter.

C. A licensee shall not take a lien upon real estate as security for any loan made under the provisions of this chapter, except a lien arising upon rendition of a judgment. Any lien taken in violation of this subsection shall be void.

D. A licensee shall, at the time any loan is made, deliver to the borrower, or if there are two or more borrowers to one of them, a statement disclosing (i) the names and addresses of the licensee and of the principal debtor on the loan contract, and (ii) a statement in compliance with Consumer Financial Protection Bureau Regulation Z (12 C.F.R. Part 1026).

E. A licensee shall give the borrower a receipt for all cash payments. The Commission may specify the form and content of such receipts in keeping with the intent and purpose of this chapter.

F. A licensee shall permit payment to be made in advance in whole, or in part equal to one or more full installments. The licensee may apply the payment first to any amounts that are due and unpaid at the time of such payment.

G. A licensee shall, upon repayment of the loan in full, (i) mark plainly every obligation and security other than a security agreement executed by the borrower with the word "Paid" or "Canceled," (ii) mark satisfied any judgment, (iii) restore any pledge, (iv) cancel and return any note and any assignment given by the borrower to the licensee, and (v) release any security agreement or other form of security instrument that no longer secures an outstanding loan between the borrower and the licensee.

H. In the event of collection by foreclosure sale or otherwise, a licensee shall pay and return to the borrower, or to another person entitled thereto, any surplus arising after the payment of the expenses of collection, sale or foreclosure and satisfaction of the debt.

I. A licensee shall not take any confession of judgment or any power of attorney running to himself or to any third person to confess judgment or to appear for the borrower in a judicial proceeding. Any such confession of judgment or power of attorney to confess judgment shall be void.

J. A licensee shall not take any note, promise to pay, or instrument of security in which blanks are left to be filled in after execution, or that does not give the amount of the loan, a clear description of the installment payments required, and the rate of interest charged. A licensee may also include the disclosures required by Consumer Financial Protection Bureau Regulation Z (12 C.F.R. Part 1026) in the note, promise to pay, or instrument of security.

K. Every loan contract shall be in writing, be signed by the borrower, provide for repayment of the amount loaned in substantially equal monthly installments of principal and interest, and include the following statement: "This loan is made pursuant to Chapter 15 of Title 6.2 of the Code of Virginia". Nothing contained in this chapter shall prevent (i) a loan being considered a new loan because the proceeds of the loan are used to pay an existing loan contract or (ii) a licensee from entering into a loan contract providing for an odd first payment period of up to 45 days and an odd first payment greater than other monthly payments because of such odd first payment period.

Code 1950, §§ 6-309, 6-310, 6-311, 6-312, 6-313, 6-315; 1956, c. 71; 1966, c. 584, §§ 6.1-279, 6.1-280, 6.1-281, 6.1-282, 6.1-283, 6.1-284.1, 6.1-285; 1968, c. 489; 1974, c. 371; 1983, c. 500; 1987, c. 683, § 6.1-284.1; 1995, c. 2; 1997, c. 113; 2001, c. 308; 2010, c. 794; 2016, c. 501; 2020, cc. 1215, 1258.

§ 6.2-1524. (Effective January 1, 2024) Required and prohibited activities and conduct.

A. Each licensee shall maintain at all times the minimum unencumbered liquid assets prescribed by § 6.2-1507.

B. A licensee or other person subject to this chapter shall not advertise, display, distribute or broadcast, or cause or permit to be advertised, displayed, distributed or broadcast, in any manner whatsoever, any false, misleading, or deceptive statement or representation with regard to the rates, terms, or conditions for loans made under this chapter. The Commission may require that charges or rates of charge, if stated by a licensee, be stated fully and clearly in such manner as it deems necessary to prevent misunderstanding by prospective borrowers. The Commission may permit or require licensees to refer in their advertising to the fact that their business is under state supervision, subject to conditions imposed by it to prevent false, misleading, or deceptive impression as to the scope or degree of protection provided by this chapter.

C. A licensee shall not take a lien upon real estate as security for any loan made under the provisions of this chapter, except a lien arising upon rendition of a judgment. Any lien taken in violation of this subsection shall be void.

D. A licensee shall, at the time any loan is made, deliver to the borrower, or if there are two or more borrowers to one of them, a statement disclosing (i) the names and addresses of the licensee and of the principal debtor on the loan contract, and (ii) a statement in compliance with Consumer Financial Protection Bureau Regulation Z (12 C.F.R. Part 1026).

E. A licensee shall give the borrower a receipt for all cash payments. The Commission may specify the form and content of such receipts in keeping with the intent and purpose of this chapter.

F. A licensee shall permit payment to be made in advance in whole, or in part equal to one or more full installments. The licensee may apply the payment first to any amounts that are due and unpaid at the time of such payment.

G. A licensee shall, upon repayment of the loan in full, (i) mark plainly every obligation and security other than a security agreement executed by the borrower with the word "Paid" or "Canceled," (ii) mark satisfied any judgment, (iii) restore any pledge, (iv) cancel and return any note and any assignment given by the borrower to the licensee, and (v) release any security agreement or other form of security instrument that no longer secures an outstanding loan between the borrower and the licensee.

H. In the event of collection by foreclosure sale or otherwise, a licensee shall pay and return to the borrower, or to another person entitled thereto, any surplus arising after the payment of the expenses of collection, sale or foreclosure and satisfaction of the debt.

I. A licensee shall not take any confession of judgment or any power of attorney running to himself or to any third person to confess judgment or to appear for the borrower in a judicial proceeding. Any such confession of judgment or power of attorney to confess judgment shall be void.

J. A licensee shall not take any note, promise to pay, or instrument of security in which blanks are left to be filled in after execution, or that does not give the amount of the loan, a clear description of the installment payments required, and the rate of interest charged. A licensee may also include the disclosures required by Consumer Financial Protection Bureau Regulation Z (12 C.F.R. Part 1026) in the note, promise to pay, or instrument of security.

K. Every loan contract shall be in writing, be signed by the borrower, provide for repayment of the amount loaned in substantially equal monthly installments of principal and interest, and include the following statement: "This loan is made pursuant to Chapter 15 of Title 6.2 of the Code of Virginia". Nothing contained in this chapter shall prevent (i) a loan being considered a new loan because the proceeds of the loan are used to pay an existing loan contract or (ii) a licensee from entering into a loan contract providing for an odd first payment period of up to 45 days and an odd first payment greater than other monthly payments because of such odd first payment period.

L. A licensee shall include as part of every loan application a question regarding whether the potential borrower has been approached, including via telephone or electronic means, by any person to send money in consideration of receiving money via a government or lottery organization.

Code 1950, §§ 6-309, 6-310, 6-311, 6-312, 6-313, 6-315; 1956, c. 71; 1966, c. 584, §§ 6.1-279, 6.1-280, 6.1-281, 6.1-282, 6.1-283, 6.1-284.1, 6.1-285; 1968, c. 489; 1974, c. 371; 1983, c. 500; 1987, c. 683, § 6.1-284.1; 1995, c. 2; 1997, c. 113; 2001, c. 308; 2010, c. 794; 2016, c. 501; 2020, cc. 1215, 1258; 2023, c. 287.

§ 6.2-1525. Wage purchases.

The payment of any amount in money, credit, goods or things in action, as consideration for any sale or assignment of, or order for, the payment of wages, salary, commission, or other compensation for services, whether earned or to be earned, shall for the purposes of this chapter be deemed a loan of money secured by the sale, assignment or order. The amount by which the compensation so sold, assigned or ordered paid exceeds the amount of consideration actually paid (i) shall be deemed for the purpose of this chapter to be interest upon the loan from the date of the payment to the date the compensation is payable and (ii) shall not, in any case, be more than is sufficient to yield, to the person making the loan, interest on his investment at the annual rate of 10 percent. Such transaction shall in all other respects be governed by and subject to the provisions of this chapter.

Code 1950, § 6-317; 1956, c. 71; 1966, c. 584, § 6.1-288; 1968, c. 489; 1974, c. 371; 1995, c. 2; 2001, c. 308; 2010, c. 794.

§ 6.2-1526. Wage assignments.

A. A valid assignment or order for the payment of future salary, wages, commissions, or other compensation for services may be given as security for a loan made by any licensee, notwithstanding the provisions of any other law to the contrary.

B. No assignment of, or order for payment of, any salary, wages, commissions, or other compensation for services, earned or to be earned, given to secure any loan made by any licensee shall be valid unless:

1. The amount of the loan is paid to the borrower simultaneously with its execution; and

2. The assignment or order is in writing, signed in person by the borrower, and not by an attorney, or if the borrower is married unless it is signed in person by both spouses, and not by an attorney. Written assent of a spouse shall not be required when the spouses have been living separate and apart for a period of at least five months prior to the giving of the assignment or order. The provisions of this section are in addition to, and not in derogation of, the general statutes pertaining to the subject.

C. Under the assignment or order, an amount equal to not more than 10 percent of the borrower's salary, wages, commissions, or other compensation for services shall be collectible from the employer of the borrower by the licensee at the time of each payment to the borrower of the salary, wages, commission, or other compensation for services, from the time that a copy of the assignment, verified by the oath of the licensee or his agent, together with a similarly verified statement of the amount unpaid upon the loan and a printed copy of this section, is served upon the employer.

Code 1950, §§ 6-318, 6-319; 1966, c. 584, §§ 6.1-289, 6.1-290; 2010, c. 794; 2020, c. 900.

§ 6.2-1527. Liens on household furniture.

No chattel mortgage or other lien on household furniture then in the possession and use of the borrower given to secure any loan made by a licensee shall be valid unless it is in writing, signed in person by the borrower, and not by an attorney, or if the borrower is married unless it is signed in person by both spouses, and not by an attorney. Written assent of a spouse shall not be required when the spouses have been living separate and apart for a period of at least five months prior to the giving of the mortgage or lien.

Code 1950, § 6-318; 1966, c. 584, § 6.1-289; 2010, c. 794; 2020, c. 900.

§ 6.2-1528. Exemptions unimpaired.

A. Nothing in this chapter shall have the effect of impairing any rights on the part of anyone as to exemptions under the poor debtors law or under any other applicable exemption law now in effect or hereafter enacted.

B. The provisions of subdivision B 2 of § 6.2-1526 and § 6.2-1527 are in addition to, and not in derogation of, the general statutes pertaining to the subject.

Code 1950, § 6-318; 1966, c. 584, § 6.1-289; 2010, c. 794.

§ 6.2-1529. Collection of loans made outside Commonwealth.

No loan made outside the Commonwealth for which greater rates of interest, consideration or charges than are permitted by the law applicable to such loan in the state in which the loan was made, have been charged, contracted for, or received shall be collected in the Commonwealth. Every person in any way participating in an effort to enforce the collection of such loan in the Commonwealth shall be subject to the provisions of this chapter.

Code 1950, § 6-320; 1956, c. 71; 1966, c. 584, § 6.1-291; 1968, c. 489; 1974, c. 371; 1995, c. 2; 2001, c. 308; 2010, c. 794.

§ 6.2-1530. Investigations; immunities.

A. For the purpose of discovering violations of this chapter or securing information lawfully required under it, the Commission may at any time investigate the loans, books and records of any person who:

1. Is engaged, or appears to the Commission to be engaged, in a business for which the person is required to be licensed and supervised under this chapter;

2. Advertises for, solicits, or holds itself out as willing to make loans subject to the provisions of this chapter; or

3. The Commission has reason to believe is violating any provision of this chapter, whether such person shall act or claim to act under or without the authority of this chapter, or as principal, agent, broker, or otherwise.

B. In furtherance of the investigation the Commission shall:

1. Have and be given free access to the offices, places of business, books, papers, accounts, records, files, safes, and vaults of all such persons; and

2. Have authority to require attendance of witnesses and to examine under oath any person whose testimony may be required relative to any such loans or business or to the subject matter of the investigation, examination or hearing.

C. Before making an investigation as provided for in this section as to any person who is neither licensed nor an applicant for a license under this chapter, an order shall be entered by the Commission. The order shall specifically direct the investigation to be made, command submission by the person whose business is to be investigated, and set forth all other details the Commission finds necessary. The Commission shall not enter such an order except upon (i) at least one affidavit, which may be given by an employee of the Commission or by any other person, (ii) documentary data, (iii) admissions of the person to be investigated, or (iv) any combination of the foregoing, satisfactorily establishing, prima facie, facts sufficient to warrant the investigation provided for by subsection A. If the person involved consents to the investigation, the foregoing requirements may be dispensed with and the investigation may be made upon direction of the Commission or the Commissioner.

D. No criminal prosecution or action for the imposition of any penalty or forfeiture provided for by this chapter may be maintained against a person not a licensee or an applicant for a license under this chapter who is investigated following entry of an order as provided in subsection C. This subsection shall not:

1. Prevent prosecution for the violation of any other criminal law or of any other law providing for penalty or forfeiture; and

2. Provide immunity from prosecution for any officer, agent, or employee of the person whose business is investigated.

E. If the Commission compels a person not a licensee or an applicant for a license under this chapter to give verbal testimony, the person so compelled to testify shall not be subject to criminal prosecution or the imposition of any penalty or forfeiture in connection with the subject matter as to which such testimony is compelled.

F. The immunities provided pursuant to subsections D and E shall not impair (i) any civil right of action, not involving penalty or forfeiture, of any person and (ii) the authority of the Attorney General to institute and prosecute a proceeding for injunctive relief as provided for in § 6.2-1537. Any facts discovered and disclosures made in the course of any investigation following entry of an order as provided in subsection C or verbal testimony compelled as provided in subsection E shall be available in any proceeding involving any civil right of action or for obtaining an injunction under this chapter against the person so investigated or so compelled to testify.

Code 1950, §§ 6-323, 6-324, 6-325, 6-326; 1956, c. 71; 1966, c. 584, §§ 6.1-294, 6.1-295, 6.1-296, 6.1-297; 1968, c. 489; 1974, c. 371; 2010, c. 794.

§ 6.2-1531. Examination.

The Commission shall, as often as it deems to be in the public interest, examine the affairs, business, office, and records of each licensee that pertain to any business licensed under this chapter. Such examination shall be conducted at least once in every three-year period. The licensee shall furnish promptly by mail or otherwise such facts and statements in connection with its business transacted in the Commonwealth that the Commission may request from time to time.

Code 1950, § 6-327; 1966, c. 584, § 6.1-298; 1976, c. 658; 1998, c. 44; 2010, c. 794.

§ 6.2-1532. Fees for examination, supervision and regulation.

To defray the costs of examination, supervision and regulation of licensed consumer finance companies, every licensee shall pay an annual fee to be calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the total assets, including loans under this chapter and other loans, of various licensees and their affiliates doing business in authorized consumer finance company offices, to the actual cost of their respective examinations, and to other factors relating to their supervision and regulation. Fees shall be assessed pursuant to this section on or before May 1 of every calendar year. All such fees shall be paid by the licensees to the State Treasurer on or before June 1 following each assessment.

1982, c. 609, § 6.1-299.1; 2010, c. 794.

§ 6.2-1533. Books, accounts, and records; pledge or deposit of notes and securities.

A. Each licensee shall maintain in its authorized consumer finance company office, or at such other place within or outside the Commonwealth as the Commission may approve, such books, accounts, and records as the Commission may reasonably require to determine whether the licensee is complying with the provisions of this chapter and with regulations adopted in furtherance thereof. Such books, accounts, and records shall be maintained in paper form or, with the Commission's approval, in any electronic format available for examination on the basis of computer printed reproduction, video display, or other medium. Any books, accounts, and records not maintained in paper form shall be convertible into clearly legible paper documents within a reasonable time. Every licensee shall preserve the books, accounts, and records for at least three years after making the final entry on any loan recorded therein.

B. If any note or security taken under this chapter shall be pledged as collateral or deposited within or outside the Commonwealth, the licensee shall notify promptly the Commission in writing of the identity and location of the person holding such paper. Prior approval of the Commission shall not be required. Any pledged or deposited paper shall be subject to examination by the Commission in accordance with subsection C as fully as if maintained in an approved location.

C. All books, accounts, and records shall be subject to examination by the Commission. If such books, accounts, and records are examined outside the Commonwealth, all reasonable costs associated with such examination shall be paid by the licensee.

Code 1950, § 6-329; 1966, c. 584, § 6.1-300; 1998, c. 44; 2010, c. 794.

§ 6.2-1534. Annual reports.

Each licensee shall annually, on or before April 1, file a report with the Commission giving such relevant information as may reasonably be required concerning its business and operations during the preceding calendar year as to each authorized consumer finance company office. Reports shall be made under oath and shall be in the form prescribed by the Commission.

Code 1950, § 6-330; 1966, c. 584, § 6.1-301; 1968, c. 489; 2000, c. 55; 2010, c. 794.

§ 6.2-1535. Regulations and orders.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules. A copy of each regulation and order adopting it shall be mailed to all licensees at least 10 days before the effective date thereof.

Code 1950, § 6-331; 1966, c. 584, § 6.1-302; 1993, c. 366; 2010, c. 794.

§ 6.2-1536. Disclosures in connection with sale of securities.

A. The Commission may adopt regulations prescribing required disclosures in connection with the offer or sale of any "security," as that term is defined in § 13.1-501 of the Virginia Securities Act (§ 13.1-501 et seq.), issued by any licensee organized under the laws of the Commonwealth.

B. The disclosures prescribed by subsection A shall be printed in bold, 10-point type and shall contain substantially the following language: "This security or these securities are being offered in Virginia pursuant to an exemption from the registration requirements of the Virginia Securities Act. The State Corporation Commission does not pass upon the adequacy or accuracy of the security or this offering circular or upon the merits of this security or this offering. These securities are not insured or guaranteed by any state or federal agency."

Code 1950, § 6-331; 1966, c. 584, § 6.1-302; 1993, c. 366; 2010, c. 794.

§ 6.2-1537. Authority of Attorney General; impoundment of property and receivership.

A. Whenever the Attorney General has reasonable cause to believe that (i) any person, not licensed under this chapter, is violating, has violated, is threatening to violate or intends to violate any provision of this chapter or any order or regulation lawfully made pursuant to the authority of this chapter and (ii) the facts justify it, the Attorney General shall institute and prosecute a lawsuit for monetary or injunctive relief or both in the Circuit Court of the City of Richmond, in the name of the Commonwealth. The court may grant monetary relief or may enjoin and restrain or both any such person from engaging in or continuing any such violation or from doing any act or acts in furtherance thereof. In any such suit a decree or order may be entered awarding such monetary relief or preliminary or final injunctive relief as may be deemed proper.

B. In addition to all other means provided by law for the enforcement of an award of monetary relief, a temporary restraining order, temporary injunction, or final injunction, the court may impound, and appoint a receiver for, (i) the property and business of the defendant, including books, papers, documents, and records pertaining thereto, (ii) so much thereof as the court deems reasonably necessary to prevent further violation of this chapter through or by means of the use of such property and business, or (iii) so much thereof as is necessary to identify borrowers who have been damaged and the amount of their damages, and to refund the amount of any such damages to the borrowers pursuant to subsection C. The receiver, when appointed and qualified, shall have such powers and duties as to custody, collection, administration, payment of debts and liquidation of the property and business as from time to time are conferred upon him by the court.

C. The Attorney General may seek and the circuit court may order or decree such other relief allowed by law, including restitution to the extent available to borrowers under § 6.2-1541.

D. In any action brought by the Attorney General by virtue of the authority granted in this section, the Attorney General shall be entitled to seek attorney fees and costs.

E. Nothing in this section shall be construed to preclude any person who suffers a loss as a result of a violation of § 6.2-1501 from maintaining an action to recover damages or restitution under § 6.2-1541.

F. No individual shall be entitled to refuse to testify in a suit brought under this section because the person's testimony would tend to incriminate such person or subject the individual to penalty or forfeiture. If called to testify by the Commonwealth or by the court trying the case, the individual may not thereafter be prosecuted for any crime or subjected to any penalty or forfeiture growing out of the transaction concerning which the individual testifies.

G. Whenever the Attorney General has reasonable cause to believe that any person not licensed under this chapter has engaged in, is engaging in, or is about to engage in any violation of the provisions of this chapter or any order or regulation lawfully made pursuant to the authority of this chapter, the Attorney General is empowered to issue a civil investigative demand. The provisions of § 59.1-9.10 shall apply mutatis mutandis to civil investigative demands issued pursuant to this section.

Code 1950, §§ 6-322, 6-333; 1966, c. 584, §§ 6.1-303, 6.1-304; 1988, c. 186; 1992, c. 9; 2010, c. 794; 2023, c. 469.

§ 6.2-1538. Copies of orders or licenses.

On application of any person, and payment of the costs, the Commission shall furnish such person with a certified copy of any order entered or license issued by it. Such copy shall be prima facie evidence in any court or proceeding of the fact of the entry of the order or of the issuance of the license.

Code 1950, § 6-334; 1966, c. 584, § 6.1-305; 2010, c. 794.

§ 6.2-1539. Review by Commission.

In addition to any other remedy he may have any licensee or any other person considering himself aggrieved by any action of the Commissioner under this chapter pursuant to authority conferred upon him or delegated to him by the Commission may, within 30 days of the action complained of, file a petition as a matter of right with the Commission to review the action. The proceeding on review shall be de novo and the record and summary of the evidence before, and findings of, the Commissioner shall be admissible as evidence before the Commission.

Code 1950, § 6-335; 1966, c. 584, § 6.1-306; 2010, c. 794.

§ 6.2-1540. Criminal penalties.

Any person, including the members, officers, directors, agents, and employees of an entity, who violates or participates in the violation of any provision of § 6.2-1501 is guilty of a Class 2 misdemeanor.

Code 1950, § 6-337; 1966, c. 584, § 6.1-308; 1986, c. 502; 2010, c. 794.

§ 6.2-1541. Unlawful contracts void; recovery of amounts paid.

A. A loan contract shall be void if any act has been done in the making or collection thereof that violates § 6.2-1501.

B. The lender on any loan for which a person has taken any action in its making or collection in violation of § 6.2-1501 shall not collect, receive, or retain any principal, interest, or charges whatsoever with respect to the loan, and any principal or interest paid on the loan shall be recoverable by the person by or for whom payment was made.

Code 1950, § 6-337; 1966, c. 584, § 6.1-308; 1986, c. 502; 2010, c. 794.

§ 6.2-1542. Duty to refund unauthorized or excess charges; liability to borrower for penalty.

A. If any amount not authorized by this chapter or in excess of the charges permitted by this chapter is charged and received by a licensee, such unauthorized or excess charge actually received by a licensee shall be refunded to the borrower or credited to the borrower's account.

B. Except for excess charges charged and received as the result of a bona fide error of computation that was not made pursuant to a regular course of dealing, the licensee shall be liable to the borrower for a penalty of twice the amount of any unauthorized or excess charge actually received by the licensee and for any court costs and reasonable attorney fees incurred by the borrower.

Code 1950, § 6-338; 1956, c. 71; 1966, c. 584, § 6.1-309; 1976, c. 658; 1986, c. 502; 2010, c. 794.

§ 6.2-1543. Civil penalties.

The Commission may impose a civil penalty not exceeding $10,000 upon any licensee who it determines, in proceedings conducted in accordance with the Commission's Rules, has violated any provision of this chapter or of any regulation or order of the Commission, either knowingly or without the exercise of due care to prevent the violation. In any proceeding under this section, a licensee shall not be penalized for any act or omission done in reasonable reliance on any regulation, order, letter, or other written directive or request of the Commission.

Code 1950, § 6-338; 1956, c. 71; 1966, c. 584, § 6.1-309; 1976, c. 658; 1986, c. 502; 2010, c. 794.

Chapter 16 - MORTGAGE LENDERS AND MORTGAGE BROKERS

§ 6.2-1600. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Entity" means any corporation, partnership, association, cooperative, limited liability company, trust, joint venture, or other legal or commercial entity.

"Licensee" means a mortgage lender or mortgage broker licensed by the Commission pursuant to this chapter.

"Mortgage broker" means any person who directly or indirectly negotiates, places or finds mortgage loans for others, or offers to negotiate, place or find mortgage loans for others. Any licensed mortgage lender that, pursuant to an executed originating agreement with the Virginia Housing Development Authority, acts or offers to act as an originating agent of the Virginia Housing Development Authority in connection with a mortgage loan shall not be deemed to be acting as a mortgage broker with respect to such mortgage loan but shall be deemed to be acting as a mortgage lender with respect to such mortgage loan, notwithstanding that the Virginia Housing Development Authority is or would be the payee on the note evidencing such mortgage loan and that the Virginia Housing Development Authority provides or would provide the funding of such mortgage loan prior to or at the settlement thereof.

"Mortgage lender" means any person who directly or indirectly originates or makes mortgage loans.

"Mortgage loan" means a loan made to an individual, the proceeds of which are to be used primarily for personal, family or household purposes, which loan is secured by a mortgage or deed of trust upon any interest in one- to four-family residential property located in the Commonwealth, regardless of where made, including the renewal or refinancing of any such loan, but excluding (i) loans to persons related to the lender by blood or marriage and (ii) loans to persons who are bona fide employees of the lender. "Mortgage loan" shall not include any loan secured by a mortgage or deed of trust upon any interest in a more than four-family residential property or property used for a commercial or agricultural purpose.

"Nationwide Mortgage Licensing System and Registry" or "Registry" means the mortgage licensing and registration system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.

"Office" means a location other than a licensee's principal place of business where (i) the licensee negotiates, places, finds, or makes Virginia mortgage loans; (ii) the licensee's name, advertising or promotional materials, or signage indicates that the licensee negotiates, places, finds, or makes Virginia mortgage loans from the location; or (iii) the licensee maintains books, accounts, or records of Virginia mortgage loans. A remote location is not an office if the requirements set forth in subsection F of § 6.2-1607 are met.

"Person" means any individual or entity.

"Principal" means any person who, directly or indirectly, owns or controls a 10 percent or greater interest in any entity.

"Remote location" means a location, other than a licensee's principal place of business or office, at which the employees or exclusive agents of a licensee may conduct business if the requirements set forth in subsection F of § 6.2-1607 are met.

"Residential property" means improved real property used or occupied, or intended to be used or occupied, for residential purposes.

1987, c. 596, § 6.1-409; 1993, c. 183; 2006, c. 422; 2008, c. 863; 2010, cc. 146, 665, 794, 831; 2012, cc. 53, 188; 2023, c. 573.

§ 6.2-1601. License requirement.

A. No person shall engage in business as a mortgage lender or a mortgage broker, or hold himself out to the general public to be a mortgage lender or a mortgage broker, unless such person has first obtained a license under this chapter. Subject to such conditions as the Commission may prescribe, an individual who is a bona fide employee or exclusive agent of a licensee may negotiate, place or find mortgage loans without being licensed as a mortgage broker.

B. Every mortgage lender and mortgage broker required to be licensed under this chapter shall register with the Registry and be subject to such registration and renewal requirements as may be established by the Registry, in addition to any requirements of this chapter. In adopting rules and regulations pursuant to § 6.2-1613, the Commission shall include any terms, conditions, or requirements applicable to such registration and renewal. Any fees required by the Registry shall be separate and apart from any fees imposed by this chapter. The Commission, at its discretion, may collect any registration and renewal fees on behalf of the Registry and remit such fees to the Registry or permit the Registry to collect any fees imposed by this chapter and remit such fees to the Commission.

C. In connection with its implementation and administration of this chapter, the Commission may establish agreements or contracts with the Registry or other entities designated by the Registry to collect, distribute, and maintain information and records, and process fees related to mortgage lenders and mortgage brokers required to be licensed under this chapter. In establishing such agreements or contracts, the Commission shall not be subject to the Virginia Public Procurement Act (§ 2.2-4300 et seq.).

1987, c. 596, § 6.1-410; 1990, c. 4; 2001, c. 24; 2010, cc. 146, 794, 831.

§ 6.2-1602. Persons exempt from chapter.

The following shall be exempt from the licensing and other provisions of this chapter:

1. Lenders making three or fewer mortgage loans in any period of 12 consecutive months;

2. Any person subject to the general supervision of or subject to examination by the Commissioner pursuant to Chapter 7 (§ 6.2-700 et seq.), 8 (§ 6.2-800 et seq.), 11 (§ 6.2-1100 et seq.), 13 (§ 6.2-1300 et seq.), or 14 (§ 6.2-1400 et seq.);

3. Any lender authorized to engage in business as a bank, savings institution, or credit union under the laws of the United States or any state, and subsidiaries and affiliates of such entities which lender, subsidiary or affiliate is subject to the general supervision or regulation of or subject to audit or examination by a regulatory body or agency of the United States or any state;

4. Nonprofit corporations making mortgage loans to promote home ownership or improvements for the disadvantaged;

5. Agencies of the federal government, or any state or municipal government, or any quasi-governmental agency making or brokering mortgage loans under the specific authority of the laws of any state or the United States;

6. Persons acting as fiduciaries with respect to any employee pension benefit plan qualified under the Internal Revenue Code who make mortgage loans solely to plan participants from plan assets;

7. Any insurance company;

8. Persons licensed by the Commonwealth as attorneys, real estate brokers, or real estate salesmen, not actively and principally engaged in negotiating, placing or finding mortgage loans, when rendering services as an attorney, real estate broker or real estate salesman; however, a real estate broker or real estate salesman who receives any fee, commission, kickback, rebate or other payment for directly or indirectly negotiating, placing or finding a mortgage loan for others shall not be exempt from the provisions of this chapter;

9. Persons acting in a fiduciary capacity conferred by authority of any court;

10. Persons licensed as small business investment companies by the Small Business Administration;

11. The Virginia Housing Development Authority and persons who (i) are approved by the Virginia Housing Development Authority pursuant to its rules and regulations to act as field originators with respect to mortgage loans made under its programs and (ii) are not engaged in any other activities for which a license is required to be obtained under this chapter; and

12. Persons who make loans or extend credit for any part of the purchase price of real property owned by such person.

1987, c. 596, § 6.1-411; 1989, cc. 411, 667; 1992, c. 156; 1995, c. 62; 1996, c. 126; 2003, c. 386; 2010, c. 794; 2012, cc. 53, 188.

§ 6.2-1603. Application for license; form; content; fee.

A. An application for a license under this chapter shall be made in writing, under oath and on a form provided by the Commissioner.

B. The application shall set forth:

1. The name and address of the applicant;

2. If the applicant is a firm or partnership, the name and address of each member of the firm or partnership;

3. If the applicant is a corporation or a limited liability company, the name and address of each officer, director, registered agent and each principal;

4. The address of each office at which the business to be licensed is to be conducted;

5. Whether the applicant seeks a license to act as a mortgage lender, mortgage broker, or both; and

6. Such other information concerning the financial responsibility, background, experience and activities of the applicant and its members, officers, directors, and principals as the Commissioner may require.

C. The application shall be accompanied by payment of the following fees:

1. A license application fee of:

a. In the case of an application for a license to act as a mortgage lender or a mortgage broker, $500; or

b. In the case of an application for a license to act as both mortgage lender and mortgage broker, $1,000; and

2. An application fee of $150 for each office at which the business to be licensed is to be conducted.

D. The application fees shall not be refundable in any event. The fees shall not be abated by surrender, suspension or revocation of the license.

1987, c. 596, § 6.1-412; 1989, c. 411; 1992, c. 283; 1993, c. 183; 2010, c. 794; 2011, c. 435.

§ 6.2-1604. Bond required.

The application for a license shall also be accompanied by a bond filed with the Commissioner with corporate surety authorized to execute such bond in the Commonwealth, in the sum of $25,000, or such greater sum as the Commissioner may require. The form of the bond shall be approved by the Commission. The bond shall be continuously maintained thereafter in full force. The bond shall be conditioned upon the applicant or licensee performing all written agreements with borrowers or prospective borrowers, correctly and accurately accounting for all funds received by him in his licensed business, and conducting his licensed business in conformity with this chapter and all applicable law. Any person who may be damaged by noncompliance of a licensee with any condition of such bond may proceed on such bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

1987, c. 596, § 6.1-413; 1989, c. 411; 2001, c. 511; 2010, c. 794.

§ 6.2-1605. Investigation of applications.

A. The Commissioner may make such investigations as he deems necessary to determine if the applicant has complied with all applicable provisions of law and regulations.

B. For the purpose of investigating individuals who are members, senior officers, directors, and principals of an applicant, such persons shall consent to a national and state criminal history records check and submit to fingerprinting. Each member, senior officer, director, and principal shall pay for the cost of such fingerprinting and criminal records check. Such persons shall cause their fingerprints, personal descriptive information, and records check fees to be submitted to either of the following, as prescribed by the Commission:

1. The Commissioner, who shall forward these items to the Central Criminal Records Exchange. The Central Criminal Records Exchange shall (i) conduct a search of its own criminal history records and forward such individuals' fingerprints and personal descriptive information to the Federal Bureau of Investigation for the purpose of obtaining national criminal history record information regarding such individuals, and (ii) forward the results of the state and national records search to the Commissioner or his designee, who shall be an employee of the Commission; or

2. The Registry, provided that it is capable of processing such criminal history records check.

C. If any member, senior officer, director, or principal of an applicant fails to cause his fingerprints, personal descriptive information, or records check fees to be submitted in accordance with subsection B, the application for licensure as a mortgage lender or mortgage broker shall be denied.

1987, c. 596, § 6.1-414; 2008, c. 863; 2010, c. 794; 2012, c. 189.

§ 6.2-1606. Qualifications.

A. Upon the filing and investigation of an application for a license, and compliance by the applicant with the provisions of §§ 6.2-1603 and 6.2-1604, the Commission shall issue and deliver to the applicant the license applied for to engage in business under this chapter at the office locations specified in the application if it finds:

1. That the financial responsibility, character, reputation, experience, and general fitness of the applicant and its members, senior officers, directors and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest and in accordance with law; and

2. That, in the case of an application for a license to act as a mortgage lender, the applicant has funds available for the operation of the business of at least $200,000.

B. If the Commission fails to make such findings, no license shall be issued and the Commissioner shall notify the applicant of the denial and the reasons for such denial.

1987, c. 596, § 6.1-415; 1988, c. 303; 1993, c. 183; 2010, c. 794.

§ 6.2-1607. Licenses; places of business; changes.

A. Each license shall state the address of each office at which the business is to be conducted and shall state fully the name of the licensee. Each licensee shall (i) display proof of licensing upon request and (ii) prominently display at any office where the licensee conducts business in person with a borrower or prospective borrower the telephone number and website address for the Commission where borrowers and prospective borrowers may confirm the status of the license. Licenses shall not be transferable or assignable, by operation of law or otherwise. No licensee shall use any name other than the name set forth on the license issued by the Commission.

B. No licensee shall open an additional office without prior approval of the Commission. Applications for such approval shall be made in writing on a form provided by the Commissioner and shall be accompanied by payment of a $150 nonrefundable application fee. The application shall be approved unless the Commission finds that the applicant has not conducted business under this chapter efficiently, fairly, in the public interest, and in accordance with law. The application shall be deemed approved if notice to the contrary has not been mailed by the Commission to the applicant within 30 days of the date the application is received by the Commission.

C. Every licensee shall within 10 days notify the Commissioner, in writing, of the closing of any approved office and of the name, address and position of each new senior officer, member, partner, or director and provide such other information with respect to any such change as the Commissioner may reasonably require.

D. Every license shall remain in force until it expires or has been surrendered, revoked, or suspended. The expiration, surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of such lender or broker.

E. Notwithstanding any other provision of this chapter, a mortgage lender or mortgage broker license shall expire at the end of each calendar year unless it is renewed by a licensee prior to the expiration date. A licensee may renew its license by (i) requesting renewal through the Registry and (ii) complying with any requirements associated with such renewal request that are imposed by the Registry. If a mortgage lender or mortgage broker license has expired, the Commission may by regulation permit the former licensee to seek license reinstatement after the license expiration date by renewing its license in accordance with this subsection and paying a reinstatement fee as prescribed by the Commission.

F. Licensees may allow employees or exclusive agents to work from a remote location if:

1. The licensee has written policies and procedures for the supervision of employees or exclusive agents working from a remote location. Such written policies and procedures shall include all the requirements of this subsection;

2. Access to the licensee's platforms and customer information is in accordance with the licensee's comprehensive written information security plan;

3. The licensee employs appropriate risk-based monitoring and oversight processes, and any employee or exclusive agent who will work from a remote location agrees to comply with the licensee's established practices;

4. No in-person customer interaction occurs at an employee's or exclusive agent's residence, unless such residence is an approved office;

5. Physical records are not maintained at a remote location;

6. Customer interactions and conversations about consumers comply with federal and state information security requirements, including applicable provisions under the Gramm-Leach-Bliley Act and the Safeguards Rule established by the Federal Trade Commission, set forth at 16 C.F.R. Part 314, as such requirements may be amended from time to time;

7. Employees or exclusive agents working at a remote location access the licensee's secure systems directly from an out-of-office device, including a laptop, phone, desktop computer, or tablet, via a virtual private network (VPN) or comparable system that ensures secure connectivity and requires a password or other forms of authentication to access;

8. The licensee ensures that appropriate security updates, patches, or other alterations to the security of all devices used at remote locations are installed and maintained;

9. The licensee has the ability to remotely lock or erase company-related contents of any device or otherwise remotely limit access to a licensee's secure systems; and

10. The Nationwide Mortgage Licensing System and Registry record of a mortgage loan originator working from a remote location designates the principal place of business as the mortgage loan originator's registered location, unless such mortgage loan originator elects an office as a registered location.

1987, c. 596, § 6.1-416; 1988, c. 303; 1990, c. 8; 1992, c. 283; 2010, c. 794; 2011, c. 435; 2016, cc. 329, 360; 2023, c. 573.

§ 6.2-1608. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire directly or indirectly 25 percent or more of the voting shares of a corporation or 25 percent or more of the ownership of any licensee unless such person first:

1. Files an application with the Commission in such form as the Commissioner may prescribe from time to time;

2. Delivers such other information to the Commissioner as the Commissioner may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, principals and members, and of any proposed new directors, senior officers, principals, or members of the licensee;

3. Submits and furnishes to the Commissioner information concerning the identity of the directors, senior officers, principals, and members of the applicant, and of any proposed new directors, senior officers, principals, or members of the licensee. Such individuals shall (i) consent to a national and state criminal history records check, submit to fingerprinting, and pay for the cost of such fingerprinting and criminal records check; and (ii) cause their fingerprints, personal descriptive information, and records check fees to be submitted to either of the following, as prescribed by the Commission:

a. The Commissioner, who shall forward these items to the Central Criminal Records Exchange. The Central Criminal Records Exchange shall (i) conduct a search of its own criminal history records and forward such individuals' fingerprints and personal descriptive information to the Federal Bureau of Investigation for the purpose of obtaining national criminal history record information regarding such individuals, and (ii) forward the results of the state and national records search to the Commissioner or his designee, who shall be an employee of the Commission; or

b. The Registry, provided that it is capable of processing such criminal history records checks; and

4. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant, its members if applicable, its directors, senior officers and principals, and any proposed new directors, members, senior officers and principals have the financial responsibility, character, reputation, experience and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by order of the Commissioner reciting the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial. If an applicant or any individual specified in subdivision A 3 fails to comply with the requirements of this section, the application shall be denied.

C. The provisions of this section shall not apply to (i) the acquisition of an interest in a licensee directly or indirectly including an acquisition by merger or consolidation by or with another licensee or a person exempt from this chapter under the provisions of subdivisions 2 through 11 of § 6.2-1602, (ii) the acquisition of an interest in a licensee directly or indirectly including an acquisition by merger or consolidation by or with a person affiliated through common ownership with the licensee, or (iii) the acquisition of an interest in a licensee by a person by bequest, descent, or survivorship or by operation of law. The person acquiring an interest in a licensee in a transaction which is exempt from filing an application by this subsection shall send written notice to the Commissioner of such acquisition within 30 days of its closing.

1988, c. 303, § 6.1-416.1; 1993, c. 183; 1998, c. 33; 2010, c. 794; 2011, c. 435; 2012, c. 189.

§ 6.2-1609. Retention of books, accounts and records.

A. Every mortgage lender or mortgage broker required to be licensed under this chapter shall maintain in its offices such books, accounts, and records as the Commission may reasonably require in order to determine whether such person is complying with the provisions of this chapter and regulations adopted hereunder. Such books, accounts, and records shall be maintained apart and separate from any other business in which the mortgage lender or mortgage broker is involved.

B. Each mortgage lender required to be licensed under this chapter shall retain, for at least three years after final payment is made on any mortgage loan or the mortgage loan is sold, whichever first occurs, copies of the note, settlement statement, truth-in-lending disclosure, and such other papers or records relating to the loan as may be required by regulation.

C. Each mortgage broker required to be licensed under this chapter shall retain for at least three years after a mortgage loan is made the original contract for his compensation, a copy of the settlement statement, and an account of fees received in connection with the loan, and such other papers or records as may be required by regulation.

1987, c. 596, § 6.1-417; 1995, c. 62; 2010, c. 794.

§ 6.2-1610. Periodic reports.

Each licensee shall file periodic written reports with the Commissioner or the Registry containing such information as the Commissioner may require concerning the licensee's business and operations. Reports shall be in the form and be submitted with such frequency and by such dates as may be prescribed by the Commissioner, who shall make and publish annually an analysis and recapitulation of the reports.

1987, c. 596, § 6.1-418; 1996, c. 30; 2010, c. 794; 2016, c. 329.

§ 6.2-1611. Investigations; examinations.

The Commission may, as often as it deems necessary, investigate and examine the affairs, business, premises, and records of any mortgage lender or mortgage broker required to be licensed under this chapter insofar as they pertain to any business for which a license is required by this chapter. Examinations of such mortgage lenders shall be conducted at least once in each three-year period. In the course of such investigations and examinations, the owners, members, officers, directors, partners, and employees of such mortgage lender or mortgage broker being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records and information which the person making such investigation or examination deems necessary. For the foregoing purposes, the person making such investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

1987, c. 596, § 6.1-419; 2010, c. 794.

§ 6.2-1612. Annual fees.

A. To defray the costs of examination, supervision, and regulation, every:

1. Mortgage lender required to be licensed under this chapter shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the business volume of an individual mortgage lender, the actual cost of the examination, and to other factors relating to the supervision and regulation; and

2. Mortgage broker required to be licensed under this chapter shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the volume of business transacted by such mortgage broker, to the actual cost of examination and to other factors relating to the supervision and regulation.

B. The annual fee prescribed in subsection A shall be assessed on or before April 25 for every calendar year. All such fees shall be paid by the licensees to the State Treasurer on or before May 25 following each assessment.

C. In addition to the annual fee prescribed in subsection A, when it becomes necessary to examine or investigate the books and records of a mortgage lender or mortgage broker required to be licensed under this chapter at a location outside the Commonwealth, the mortgage lender or mortgage broker shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement, the actual travel and reasonable living expenses incurred on account of its examination, supervision and regulation, or shall pay at a reasonable per diem rate approved by the Commission.

1987, c. 596, § 6.1-420; 1988, c. 303; 1990, c. 32; 1996, c. 524; 2010, c. 794.

§ 6.2-1613. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to present evidence and be heard, in accordance with the Commission's Rules.

1987, c. 596, § 6.1-421; 2010, c. 794.

§ 6.2-1614. Prohibitions applicable to mortgage lenders and mortgage brokers.

No mortgage lender or mortgage broker required to be licensed under this chapter shall:

1. Obtain any agreement or instrument in which blanks are left to be filled in after execution;

2. Take an interest in collateral other than the real estate or residential property securing a mortgage loan, including any fixtures and appliances thereon and any mobile or manufactured home placed on such real estate even if such mobile or manufactured home is not permanently affixed thereto;

3. Obtain any exclusive dealing or exclusive agency agreement from any borrower;

4. Delay closing of any mortgage loan for the purpose of increasing interest, costs, fees, or charges payable by the borrower;

5. Obtain any agreement or instrument executed by a borrower which contains an acceleration clause permitting the unpaid balance of a mortgage loan to be declared due for any reason other than failing to make timely payments of interest and principal, submitting false information in connection with an application for the mortgage loan, breaching any representation or covenant made in the agreement or instrument, or failing to perform any other obligations undertaken in the agreement or instrument;

6. Recommend or encourage a person to default on an existing loan or other debt, if such default adversely affects such person's creditworthiness, in connection with the solicitation or making of a mortgage loan that refinances all or any portion of such existing loan or debt;

7. Knowingly or intentionally engage in the act or practice of refinancing a mortgage loan within 12 months following the date the refinanced mortgage loan was originated, unless the refinancing is in the borrower's best interest, which act or practice is commonly referred to as "flipping." This prohibition shall apply regardless of whether the interest rate, points, fees, and charges paid or payable by the borrower in connection with the refinancing exceed any limitation established pursuant to Chapter 3 (§ 6.2-300 et seq.) or Article 2 (§ 6.2-406 et seq.) of Chapter 4. Factors to be considered in determining if the refinancing is in the borrower's best interest include but are not limited to whether:

a. The borrower's new monthly payment is lower than the total of all monthly obligations being financed, taking into account the costs and fees;

b. There is a change in the amortization period of the new loan;

c. The borrower receives cash in excess of the costs and fees of refinancing;

d. The rate of interest on the borrower's note is reduced;

e. There is a change from an adjustable to a fixed rate loan, taking into account costs and fees; and

f. The refinancing is necessary to respond to a bona fide personal need or an order of an appropriate court; or

8. Use or cause to be published any advertisement that:

a. Contains any false, misleading, or deceptive statement or representation; or

b. Identifies the mortgage lender or mortgage broker by any name other than the name set forth on the license issued by the Commission.

1987, c. 596, §§ 6.1-422, 6.1-424; 1989, c. 667; 1993, c. 183; 1995, c. 62; 1997, c. 228; 2001, cc. 502, 510, 511, § 6.1-422.1; 2003, c. 386; 2009, cc. 189, 261; 2010, c. 794.

§ 6.2-1615. Other prohibitions applicable to mortgage lenders.

No mortgage lender required to be licensed under this chapter shall fail to require the person closing the mortgage loan to provide to the borrower prior to closing of the mortgage loan, a (i) settlement statement and (ii) disclosure which conforms to that required by the provisions of 15 U.S.C. § 1601 et seq. and Consumer Financial Protection Bureau Regulation Z (12 C.F.R. Part 1026).

1987, c. 596, § 6.1-422; 1989, c. 667; 1993, c. 183; 1997, c. 228; 2001, cc. 502, 511; 2009, cc. 189, 261; 2010, c. 794; 2016, c. 501.

§ 6.2-1616. Other prohibitions applicable to mortgage brokers.

A. As used in this section:

"Real estate broker" has the same meaning provided in § 54.1-2100.

"Real estate salesperson" has the same meaning provided in § 54.1-2101.

B. No mortgage broker required to be licensed under this chapter shall:

1. Except for documented costs of credit reports and appraisals, receive compensation from a borrower until a written commitment to make a mortgage loan is given to the borrower by a mortgage lender;

2. Receive compensation from a mortgage lender of which he is a principal, partner, trustee, director, officer, or employee;

3. Receive compensation from a borrower in connection with any mortgage loan transaction in which he is the lender or a principal, partner, trustee, director, or officer of the lender;

4. Receive compensation from a borrower other than that specified in a written agreement signed by the borrower; or

5. Fail to use reasonable skill, care, and diligence in exercising the broker's duty, which duty is hereby created, to make reasonable efforts to secure a mortgage loan that is in the best interests of the applicant, considering the applicant's circumstances and loan characteristics, including but not limited to the product type, rates, charges, and repayment terms of the loan.

C. If a mortgage broker negotiates, places, or finds a mortgage loan and acts as a real estate broker or real estate salesperson in connection with the sale of the real estate that secures such loan, the mortgage broker shall conspicuously provide to the borrower the following written disclosure at the time the mortgage broker services are first offered to the borrower:

YOU ARE HEREBY NOTIFIED THAT YOU ARE NOT REQUIRED TO ENTER INTO ANY ARRANGEMENT FOR REAL ESTATE BROKER OR REAL ESTATE SALESPERSON SERVICES WITH A REAL ESTATE BROKER OR REAL ESTATE SALESPERSON TO WHOM WE HAVE REFERRED YOU.

YOU ARE HEREBY NOTIFIED THAT [NAME OF MORTGAGE BROKER] WILL BE RECEIVING COMPENSATION FOR PROVIDING BOTH MORTGAGE BROKER SERVICES AND REAL ESTATE BROKER OR REAL ESTATE SALESPERSON SERVICES IN CONNECTION WITH THE SALE OF THE REAL ESTATE THAT SECURES THIS MORTGAGE LOAN.

YOU ARE HEREBY NOTIFIED THAT WE DO NOT REPRESENT ALL OF THE LENDERS IN THE MARKET AND THE LENDERS WE DO REPRESENT MAY NOT OFFER THE LOWEST INTEREST RATES OR BEST TERMS AVAILABLE TO YOU.

D. The requirements of this section are in addition to the requirements of the federal Real Estate Settlement Procedures Act of 1974 (12 U.S.C. § 2601 et seq.) and regulations adopted thereunder.

1987, c. 596, § 6.1-422; 1989, c. 667; 1993, c. 183; 1997, c. 228; 2001, cc. 502, 511; 2009, cc. 189, 261; 2010, c. 794; 2022, cc. 400, 401.

§ 6.2-1617. Application to certain real estate brokers.

The provisions of this chapter shall not be construed to prohibit a real estate broker, as defined in § 54.1-2100, who is either an owner of an interest in a real estate firm or acts as a real estate broker in a sole proprietorship, from:

1. Having an ownership interest in a mortgage broker or mortgage lender;

2. Receiving returns on investment arising from the real estate broker's ownership interest in a mortgage broker or mortgage lender; or

3. Receiving payment of compensation for services actually performed for a mortgage broker or mortgage lender in which the real estate broker has an ownership interest.

1987, c. 596, § 6.1-422; 1989, c. 667; 1993, c. 183; 1997, c. 228; 2001, cc. 502, 511; 2009, cc. 189, 261; 2010, c. 794.

§ 6.2-1618. Escrow accounts.

A. All moneys required by a mortgage lender required to be licensed under this chapter to be paid by borrowers in escrow to defray future taxes or insurance premiums, or for other lawful purposes, shall be kept in accounts segregated from accounts of the lender, and shall not be commingled with other funds of the lender.

B. No licensed mortgage lender shall require any borrower to pay any moneys in escrow to defray future taxes and insurance premiums, or for any other purpose, in connection with a subordinate mortgage loan as referred to in Article 2 (§ 6.2-406 et seq.) of Chapter 4, except where escrows for such purposes are not being maintained in connection with the mortgage loan superior to such subordinate mortgage loan.

C. Mortgage lenders holding money in escrow for insurance premiums shall notify the insurer in writing within 30 days of a change of the mortgage lender's billing address, or 60 days prior to the renewal date of the insurance policy, whichever is later.

1987, c. 596, § 6.1-423; 2001, c. 504; 2010, c. 794.

§ 6.2-1619. Suspension or revocation of license.

A. The Commission may suspend or revoke any license issued under this chapter to a mortgage lender or mortgage broker upon any of the following grounds:

1. Any ground for denial of a license under this chapter;

2. Any violation of the provisions of this chapter or regulations adopted by the Commission pursuant thereto, or a violation of any other law or regulation applicable to the conduct of the mortgage lender's or mortgage broker's business;

3. A course of conduct consisting of the failure to perform written agreements with borrowers;

4. Failure to account for funds received or disbursed to the satisfaction of the person supplying or receiving such funds;

5. Failure to pay when due reasonable fees to a licensed appraiser for appraisal services that are (i) requested from the appraiser in writing by the mortgage broker or mortgage lender or an employee of the mortgage broker or mortgage lender and (ii) performed, in accordance with the terms of the contract with the appraiser and all regulatory requirements related to such appraiser and appraisal, by the appraiser in connection with the origination or closing of a mortgage loan for a customer of the mortgage broker or mortgage lender;

6. Failure to disburse funds in accordance with any agreement connected with, and promptly upon closing of, a mortgage loan, taking into account any applicable right of rescission;

7. Conviction of a felony or misdemeanor involving fraud, misrepresentation or deceit;

8. Entry of a judgment against the licensee involving fraud, misrepresentation or deceit;

9. Entry of a federal or state administrative order against the licensee for violation of any law or any regulation applicable to the conduct of his business;

10. Refusal to permit an investigation or examination by the Commission;

11. Failure to pay any fee or assessment imposed by this chapter; or

12. Failure to comply with any order of the Commission.

B. For the purposes of this section, acts of any officer, director, member, partner, or principal shall be deemed acts of the licensee.

1987, c. 596, § 6.1-425; 1993, c. 183; 2008, c. 863; 2010, c. 794.

§ 6.2-1620. Censuring, suspending, or barring persons.

A. The Commission, after providing notice and an opportunity for a hearing, may (i) censure a person, (ii) suspend a person for a defined period from any position of employment, management, or control of any licensee, or (iii) bar a person from any position of employment, management, or control of any licensee, if the Commission finds that:

1. The censure, suspension or bar is in the public interest and that the person, after July 1, 2003, has committed or caused a violation of this chapter or any regulation or order of the Commission; or

2. The person, after July 1, 2003, was (i) convicted of, or pled guilty or nolo contendere to, any crime; (ii) held liable in any civil action by final judgment; or (iii) held liable in any administrative proceeding by any public agency, if the criminal conviction or plea, or the holding in the civil action or administrative proceeding, involved any offense reasonably related to the qualifications, functions, or duties of a person employed by, or in a position of management or control of, a licensee.

B. Persons suspended or barred under this section are prohibited from participating in any business activity of a licensee and from engaging in any business activity on the premises where a licensee is conducting its business. This subsection shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a licensee.

2003, c. 386, § 6.1-425.1; 2010, c. 794.

§ 6.2-1621. Filing of written report with Commissioner; events affecting activities of licensee.

A. A licensee shall file a written report with the Commissioner within 15 days of becoming aware of the occurrence of any of the following:

1. The filing for bankruptcy or reorganization by the licensee;

2. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority;

3. The denial of the opportunity of the licensee to engage in business by any state or governmental authority;

4. Any felony indictment of the licensee or any of its employees, officers, directors, or principals;

5. Any felony conviction of the licensee or any of its employees, officers, directors, or principals; and

6. Such other events as the Commissioner may determine and identify by regulation.

B. The report shall be in writing and describe the event and its expected impact on the activities of the licensee in the Commonwealth.

2003, c. 386, § 6.1-425.2; 2010, c. 794.

§ 6.2-1622. Cease and desist orders.

A. If the Commission determines that any mortgage lender or mortgage broker required to be licensed hereunder has violated any provision of this chapter or any regulation adopted pursuant thereto, the Commission may, upon 21 days' notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of such mortgage lender or mortgage broker and shall state the grounds for the contemplated action.

B. Within 14 days of mailing the notice, the person named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not issue a cease and desist order except based upon findings made at the hearing. The hearing shall be conducted in accordance with the provisions of Title 12.1. The Commission may enforce compliance with any such order issued under this section by imposition and collection of such fines and penalties as may be prescribed by Commission regulations.

1987, c. 596, § 6.1-426; 2010, c. 794.

§ 6.2-1623. Notice of proposed suspension or revocation.

The Commission may not revoke or suspend the license of any licensee upon any of the grounds set forth in § 6.2-1619 until it has given the mortgage lender or mortgage broker (i) 21 days' notice in writing of the reasons for the proposed revocation or suspension and (ii) an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of such licensee and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the licensee named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not suspend or revoke the license except based upon findings made at such hearing. The hearing shall be conducted in accordance with the provisions of Title 12.1.

1987, c. 596, § 6.1-427; 2010, c. 794.

§ 6.2-1624. Civil penalties.

In addition to the authority conferred under §§ 6.2-1619 and 6.2-1622, the Commission may impose a civil penalty not exceeding $2,500 upon any mortgage lender or mortgage broker required to be licensed under this chapter who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter or any other law or regulation applicable to the conduct of the mortgage lender's or mortgage broker's business. For the purposes of this section, each separate violation shall be subject to the civil penalty herein prescribed, and each day after the date of notification, excluding Sundays and holidays, as prescribed in § 2.2-3300, that an unlicensed person engages in the business or holds himself out to the general public as a mortgage lender or mortgage broker shall constitute a separate violation.

1987, c. 596, § 6.1-428; 1990, c. 4; 2001, c. 511; 2008, c. 863; 2010, c. 794.

§ 6.2-1625. Criminal penalties.

Any person not exempt from the licensure requirements of this chapter who acts as a mortgage lender or mortgage broker in the Commonwealth without having obtained a license is guilty of a Class 6 felony. For the purposes of this section, each violation shall constitute a separate offense.

1987, c. 596, § 6.1-429; 2010, c. 794.

§ 6.2-1626. Authority of Attorney General; referral by Commission to Attorney General.

A. If the Commission determines that a licensee is in violation of, or has violated, § 6.2-1614, 6.2-1615, or 6.2-1616, or any provision of Chapter 3 (§ 6.2-300 et seq.) or Chapter 4 (§ 6.2-400 et seq.), the Commission may refer the information to the Attorney General and may request that the Attorney General investigate such violations.

B. Upon such referral, the Attorney General:

1. May seek to enjoin violations of such laws. The appropriate circuit court may enjoin such violations notwithstanding the existence of an adequate remedy at law; and

2. May seek, and the circuit court may order or decree, damages and such other relief allowed by law, including restitution to the extent available to borrowers under applicable law.

C. Persons entitled to any relief authorized by this section shall be identified by order of the court within 180 days from the date of the order permanently enjoining the unlawful act or practice.

D. In any action brought by the Attorney General by virtue of the authority granted in this section, the Attorney General shall be entitled to seek attorney fees and costs.

E. The Attorney General shall be authorized to bring an action to enjoin violations of the Real Estate Settlement Procedures Act of 1974 (RESPA) (12 U.S.C. § 2601 et seq.), to the extent authorized by §§ 8 and 16 of RESPA (12 U.S.C. §§ 2607 and 2614).

1987, c. 596, § 6.1-430; 2001, c. 510; 2008, c. 863; 2009, cc. 204, 727; 2010, c. 794.

§ 6.2-1627. Private actions.

A. Nothing in this chapter shall be construed to preclude any person who suffers loss as a result of a violation of Chapter 3 (§ 6.2-300 et seq.) or Chapter 4 (§ 6.2-400 et seq.) from maintaining an action to recover damages or restitution and, as provided by statute, attorney fees. However, in any matter in which the Attorney General has exercised his authority pursuant to § 6.2-1626, an individual action shall not be maintainable if the individual has received damages or restitution pursuant to § 6.2-1626.

B. A borrower who suffers a loss as a result of a mortgage broker's breach of duty as set forth in subdivision B 5 of § 6.2-1616 may bring an action against such broker to recover actual damages. In addition to any damages awarded, such borrower also may be awarded attorney fees and court costs.

1987, c. 596, § 6.1-431; 2009, cc. 189, 261; 2010, c. 794; 2022, cc. 400, 401.

§ 6.2-1628. Enforcement of prohibitions on certain practices; recovery of attorney fees.

A. The Attorney General, the Commission, or any party to a mortgage loan may enforce the provisions of §§ 6.2-1614, 6.2-1615, and 6.2-1616.

B. In any suit instituted by a borrower who alleges that the defendant violated § 6.2-1614, 6.2-1615, or 6.2-1616, the presiding judge may, in the judge's discretion, allow reasonable attorney fees to the attorney representing the prevailing party. The attorney fees shall be taxed as a part of the court costs and payable by the losing party upon a finding by the presiding judge that (i) the party charged with the violation has willfully engaged in the act or practice with which he was charged or (ii) the party instituting the action knew, or should have known, that the action was frivolous and malicious.

C. The provisions of this section shall be in addition to, and shall not impair, the rights of and remedies available to borrowers in mortgage loans otherwise provided by law.

2001, c. 510, § 6.1-422.1; 2003, c. 386; 2010, c. 794.

§ 6.2-1629. Prohibited practices; authority of the Attorney General.

A. Notwithstanding whether a person is licensed, is required to be licensed, or is exempt from licensure under this chapter, and notwithstanding any other provision of the law to the contrary, no person that is engaged in the business of originating residential mortgage loans in the Commonwealth shall use any deception, fraud, false pretense, false promise, or misrepresentation in connection with a mortgage loan transaction.

B. Whenever the Attorney General has reasonable cause to believe that any person has engaged in, or is engaging in, or is about to engage in, any violation of this section, the Attorney General is empowered to issue a civil investigative demand. The provisions of § 59.1-9.10 shall apply, mutatis mutandis, to civil investigative demands issued pursuant to this section.

C. The Attorney General may cause an action to be brought in the appropriate circuit court in the name of the Commonwealth to enjoin any violation of this section. The circuit court having jurisdiction may enjoin such violations notwithstanding the existence of an adequate remedy at law. In any action under this section, it shall not be necessary that damages or intent be proved to establish a violation. The standard of proof at trial shall be preponderance of the evidence. The circuit courts are authorized to issue temporary or permanent injunctions to restrain and prevent violations of this section.

D. In any action brought under this section, if the court finds that a person has willfully engaged in a violation of this section, the Attorney General may recover, upon petition to the court, a civil penalty of not more than $2,500 per violation.

E. In any action brought under this section, the Attorney General may recover damages and such other relief allowed by law, including restitution on behalf of borrowers injured by violations of this section as well as costs and reasonable expenses incurred by the Commonwealth in investigation and preparing the case, including attorney fees.

F. Unless the Attorney General determines that a person subject to the provisions of this section intends to depart from the Commonwealth or to remove his property from the Commonwealth, or to conceal himself or his property in the Commonwealth, or on a reasonable determination that irreparable harm may occur if immediate action is not taken, the Attorney General shall, before initiating any legal proceedings as provided in this section, give notice in writing that such proceedings are contemplated, and allow such person a reasonable opportunity to appear before the Attorney General and show that a violation did not occur or execute an assurance of voluntary compliance or consent judgment.

G. Nothing in this section shall create a private right of action in favor of any individual aggrieved by a violation of this section.

2009, cc. 204, 727, § 6.1-430.1; 2010, c. 794.

Chapter 17 - Mortgage Loan Originators

§ 6.2-1700. Definitions.

As used in this chapter:

"Act" means the federal Secure and Fair Enforcement for Mortgage Licensing Act, Title V (§ 1501 et seq.) of the Housing and Economic Recovery Act of 2008, P.L. 110-289.

"Administrative or clerical tasks" means the receipt, collection, and distribution of information common for the processing or underwriting of a residential mortgage loan in the mortgage industry and communication with the consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.

"Covered financial institution" has the same meaning as that term is defined in 12 C.F.R. § 1007.102.

"Dwelling" means a residential structure or mobile home that contains one to four family housing units, or individual units of condominiums or cooperatives.

"Employee" means an individual (i) whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person and (ii) whose compensation for federal income tax purposes is reported, or required to be reported, on a W-2 form issued by the controlling person.

"Immediate family member" means a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships.

"Licensee" means an individual licensed under this chapter.

"Loan processor or underwriter" means an individual who, with respect to the origination of a residential mortgage loan, performs clerical or support duties at the direction of and subject to the supervision and instruction of a licensee or a registered mortgage loan originator. For the purposes of this definition, clerical or support duties include (i) the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan and (ii) communication with a consumer to obtain the information necessary for the processing or underwriting of a residential mortgage loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.

"Mortgage loan originator" means an individual who (i) takes an application for or offers or negotiates the terms of a residential mortgage loan in which the dwelling is or will be located in the Commonwealth or (ii) represents to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform any of the activities described in clause (i).

"Nationwide Multistate Licensing System and Registry" or "Registry" means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of mortgage loan originators.

"Nontraditional mortgage product" means any mortgage product other than a 30-year fixed rate mortgage.

"Real estate brokerage activities" means any activity that involves offering or providing real estate brokerage services to the public, including (i) acting as a real estate broker, real estate agent, or real estate salesperson for a buyer, seller, lessor, or lessee of real property; (ii) bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property; (iii) negotiating any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to any such transaction; (iv) engaging in any activity for which a person is required to be licensed or registered as a real estate broker, real estate agent, or real estate salesperson; and (v) offering to engage in any activity or act in any capacity described in clauses (i) through (iv).

"Registered mortgage loan originator" means any individual who (i) takes an application for or offers or negotiates the terms of a residential mortgage loan in which the dwelling is or will be located in the Commonwealth, (ii) is an employee of a covered financial institution, and (iii) is registered with, and maintains a unique identifier through, the Registry.

"Residential mortgage loan" means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling.

"Unique identifier" means a number or other identifier assigned by protocols established by the Registry that permanently identifies a mortgage loan originator.

2009, cc. 273, 453, § 6.1-431.1; 2010, c. 794; 2011, cc. 301, 435; 2012, cc. 52, 187; 2013, cc. 20, 380; 2014, cc. 295, 343; 2019, c. 740.

§ 6.2-1701. License requirement.

A. Except as otherwise provided in § 6.2-1701.3, no individual shall engage in the business of a mortgage loan originator unless such individual has first obtained and maintains annually a license under this chapter.

B. The following shall be exempt from licensing and other provisions of this chapter:

1. Any individual engaged solely as a loan processor or underwriter. Except as otherwise provided in this subsection, an individual acting as an independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter unless such individual has first obtained and maintains annually a mortgage loan originator license;

2. Any individual who only performs administrative or clerical tasks on behalf of a mortgage loan originator;

3. Any individual who only performs real estate brokerage activities and is licensed or registered in accordance with applicable law, unless the individual is compensated directly or indirectly by the lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator;

4. Any individual solely involved in extensions of credit relating to timeshare plans, as that term is defined in 11 U.S.C. § 101 (53D);

5. A registered mortgage loan originator;

6. Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual;

7. Any individual who acts as a loan originator in providing financing for the sale of that individual's own residence;

8. A licensed attorney, provided that the attorney's mortgage loan origination activities are: (i) considered by the Supreme Court of Virginia to be part of the authorized practice of law within the Commonwealth, (ii) carried out within an attorney-client relationship, and (iii) accomplished by the attorney in compliance with all applicable laws, rules, ethics, and standards;

9. Any employee of federal, state, or local government, or a housing finance agency, who acts as a mortgage loan originator only pursuant to his official duties of employment. For the purposes of this subdivision, "local government" means any county, city, or town or other local or regional political subdivision; and

10. Any employee of a bona fide nonprofit organization, as determined by the Commission in accordance with § 6.2-1701.1, who acts as a mortgage loan originator only (i) pursuant to his official duties of employment and (ii) with respect to residential mortgage loans with terms that are favorable to a borrower.

2009, cc. 273, 453, § 6.1-431.2; 2010, c. 794; 2012, cc. 52, 187; 2013, cc. 20, 380; 2014, cc. 295, 343; 2019, c. 740.

§ 6.2-1701.1. Bona fide nonprofit organizations.

A. The Commission shall prescribe by regulation (i) the procedures and criteria that it will use to determine whether an organization is a bona fide nonprofit organization and (ii) the information and fees that must be submitted by an organization to the Commission in connection with a request for a determination under this section. In establishing the criteria for a bona fide nonprofit organization, the Commission shall give consideration to the criteria that have been adopted by the Consumer Financial Protection Bureau or any other federal agency with rulemaking authority under the Act.

B. The Commission shall, as often as it deems necessary, investigate and periodically examine the business activities, books, and records of any bona fide nonprofit organization insofar as they pertain to the criteria that the Commission has prescribed pursuant to clause (i) of subsection A. In the course of such investigations and examinations, the organization being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all books, records, and information that the person making such investigation or examination deems necessary.

C. The Commission may, after providing notice and an opportunity for a hearing, revoke its determination that an organization is a bona fide nonprofit organization if it finds that the organization no longer meets the criteria prescribed by the Commission pursuant to clause (i) of subsection A.

2012, cc. 52, 187.

§ 6.2-1701.2. Repealed.

Repealed by Acts 2019, c. 740, cl. 2, effective July 1, 2019.

§ 6.2-1701.3. Temporary authority to act as a mortgage loan originator.

A. An individual shall be deemed to have temporary authority to act as a mortgage loan originator in the Commonwealth to the extent authorized by, and subject to the terms and conditions prescribed in, § 1518 of the Act.

B. A mortgage lender or mortgage broker that employs an individual who is deemed to have temporary authority to act as a mortgage loan originator in the Commonwealth pursuant to this section shall be subject to the requirements of this chapter and Chapter 16 (§ 6.2-1600 et seq.) to the same extent that such mortgage lender or mortgage broker would be subject to such requirements if such individual were a licensed mortgage loan originator under this chapter.

C. An individual who is deemed to have temporary authority to act as a mortgage loan originator in the Commonwealth pursuant to this section and acts as a mortgage loan originator shall be subject to the requirements of this chapter to the same extent as if such individual was a licensed mortgage loan originator under this chapter.

2019, c. 740.

§ 6.2-1702. Application for license; form; content; fee.

A. An application for a license under this chapter shall be on a form provided by the Registry.

B. The application shall set forth:

1. The name and residential address of the applicant;

2. The address of the applicant's employer or the address where the applicant will act as a mortgage loan originator, as applicable; and

3. Such other information concerning the financial responsibility, background, experience, and activities of the applicant as the Commissioner may require.

C. The application shall be accompanied by payment of an application fee in an amount not to exceed $150, or a lesser amount as may be prescribed by the Commission. The application fee shall be in addition to any other fees payable by the applicant, including but not limited to fees for pre-licensing education and testing, fingerprinting, criminal background checks, credit reports, or administrative fees charged by the Registry.

D. The application fee shall not be refundable in any event. The fee shall not be abated by surrender, suspension, or revocation of the license.

2009, cc. 273, 453, § 6.1-431.3; 2010, c. 794.

§ 6.2-1703. Bond required.

A. The application for a license shall be accompanied by a bond to be filed with the Commission with corporate surety authorized to execute such bond in the Commonwealth, the form of which shall be approved by the Commission.

1. If the applicant is not an employee or exclusive agent of a person licensed or exempt from licensing under Chapter 16 (§ 6.2-1600 et seq.), the bond shall be an individual surety bond for the applicant; or

2. If the applicant is an employee or exclusive agent of a person licensed or exempt from licensing under Chapter 16 (§ 6.2-1600 et seq.), the bond shall be a surety bond filed by such person covering all such employees and exclusive agents holding or applying for a license as a mortgage loan originator.

B. The amount of the bond shall be $25,000, or such greater sum as the Commission may require based on the total dollar amount of residential mortgage loans originated in the preceding calendar year by (i) the applicant, in the case of the bond referred to in subdivision A 1 or (ii) the person licensed or exempt from licensing under Chapter 16 (§ 6.2-1600 et seq.), in the case of the bond referred to in subdivision A 2. A bond already filed with the Commission pursuant to § 6.2-1604 may be applied toward the minimum bond required by this section, subject to approval by the Commission. In the case of the bond referred to in subdivision A 2, it shall be the responsibility of the person licensed or exempt from licensing under Chapter 16 (§ 6.2-1600 et seq.) to provide information, in a form satisfactory to the Commission, sufficient for determining and verifying the total dollar amount of residential mortgage loans originated in the preceding calendar year.

C. Such bond shall be continuously maintained thereafter in full force.

D. Such bond shall be conditioned upon the licensee: (i) performing all written agreements with borrowers or prospective borrowers; (ii) correctly and accurately accounting for all funds received by him in the course of his business activities as a licensee; and (iii) conducting himself in conformity with this chapter and all applicable laws and regulations.

E. Any person who may be damaged by noncompliance of a licensee with any condition of such bond may proceed on such bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

2009, cc. 273, 453, § 6.1-431.4; 2010, c. 794.

§ 6.2-1704. Mortgage loan originator background checks.

A. In connection with an application for licensing as a mortgage loan originator, the applicant shall furnish to the Registry information concerning the applicant's identity, including fingerprints for submission to the Federal Bureau of Investigation or any federal or state governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check, as prescribed by the Commission.

B. The applicant shall also submit personal history and experience in a form prescribed by the Registry, including submission of authorization for the Registry and the Commission to obtain (i) an independent credit report from a consumer reporting agency described in § 603(p) of the Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.), and (ii) information related to any administrative, civil, or criminal findings by any governmental jurisdiction.

C. For the purposes of this section and in order to reduce the points of contact that the Federal Bureau of Investigation may be required to maintain, the Commission may use the Registry as a channeling agent for requesting information from, and distributing information to, the Department of Justice, other governmental agency, or any other source.

2009, cc. 273, 453, § 6.1-431.5; 2010, c. 794.

§ 6.2-1705. Coordination of licensing.

In connection with its administration and enforcement of this chapter, the Commission is authorized to establish agreements or contracts with the Registry or other entities designated by the Registry to collect, distribute, and maintain information and records, and to process transaction fees and other fees, related to licensees and other persons subject to this chapter. When establishing such agreements or contracts the Commission shall not be subject to the Virginia Public Procurement Act (§ 2.2-4300 et seq.). Notwithstanding the provisions of § 6.2-101, the Commission shall report regularly to the Registry any violations of this chapter, enforcement actions, and license status changes. The Commission shall report to the Registry only those violations, actions, and license status changes effected by final order of the Commission or by the Commissioner pursuant to his delegated authority.

2009, cc. 273, 453, § 6.1-431.6; 2010, c. 794.

§ 6.2-1706. Qualifications.

Upon the filing and investigation of an application for a license and compliance by the applicant with all applicable provisions of this chapter, the Commission shall issue and deliver to the applicant the license applied for to engage in business under this chapter if it finds that the financial responsibility, character, and general fitness of the applicant are such as to warrant belief that the licensee will act as a mortgage loan originator efficiently and fairly, in the public interest, and in accordance with law. If the Commission fails to make such findings, no license shall be issued and the Commissioner shall notify the applicant of the denial and the reasons for such denial. The Commission shall not base a license denial, in whole or in part, on an applicant's credit score, nor shall it use a credit report as the sole basis for license denial.

2009, cc. 273, 453, § 6.1-431.7; 2010, c. 794; 2014, cc. 295, 343; 2019, c. 740.

§ 6.2-1707. Other conditions for mortgage loan originator licensing.

In addition to the findings required by § 6.2-1706, the Commission shall not issue a mortgage loan originator license unless it finds that:

1. The applicant has never had a mortgage loan originator license revoked by any governmental authority;

2. The applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court (i) during the seven-year period preceding the application for licensing and registration; or (ii) at any time preceding such date of application if such felony involved an act of fraud, dishonesty, breach of trust, or money laundering;

3. The applicant has completed the pre-licensing education requirement described in § 6.2-1708;

4. The applicant has passed a written test that meets the test requirement described in § 6.2-1709; and

5. The applicant has become registered through, and obtained a unique identifier from, the Registry.

2009, cc. 273, 453, § 6.1-431.8; 2010, c. 794; 2014, cc. 295, 343; 2019, c. 740.

§ 6.2-1708. Pre-licensing education of mortgage loan originators.

A. In order to meet the pre-licensing education requirement referred to in subdivision 3 of § 6.2-1707, an applicant shall complete at least 20 hours of pre-licensing education courses, approved in accordance with subsection B, which shall include at least (i) three hours of federal law and regulations; (ii) three hours of ethics, which shall include instruction about fraud, consumer protection, and fair lending issues; and (iii) two hours of training related to lending standards for the nontraditional mortgage product marketplace.

B. Pre-licensing education courses shall be reviewed and approved by the Registry based upon reasonable standards. Review and approval of a course shall include review and approval of the course provider.

C. Nothing in this section shall preclude the provision of any pre-licensing education course that has been approved by the Registry by: (i) the employer of the applicant; (ii) an entity that is affiliated with the applicant by any agency contract; or (iii) a subsidiary or affiliate of such employer or entity.

D. Pre-licensing education courses may be offered in a classroom, online, or by any other means approved by the Registry.

E. Except as otherwise provided by the Commission, pre-licensing education courses shall be subject to such expiration rules as may be established by the Registry. Expired courses shall not count toward the minimum number of hours of pre-licensing education required by subsection A.

2009, cc. 273, 453, § 6.1-431.9; 2010, c. 794; 2019, c. 740.

§ 6.2-1709. Testing of mortgage loan originator applicants.

A. In order to meet the written test requirement referred to in subdivision 4 of § 6.2-1707, an individual shall pass, in accordance with reasonable standards established under this section, a qualified written test that has been developed by the Registry and administered by a test provider approved by the Registry.

B. A written test shall not be a qualified written test for purposes of subsection A unless the test adequately measures the applicant's knowledge and comprehension in appropriate subject areas, including: (i) ethics; (ii) federal law and regulation pertaining to mortgage loan origination; (iii) state law pertaining to mortgage loan origination; and (iv) federal and state law and regulation pertaining to fraud, consumer protection, the nontraditional mortgage product marketplace, and fair lending issues.

C. Nothing in this section shall prohibit a test provider approved by the Registry from providing a test at a location of: (i) the employer of the applicant; (ii) any subsidiary or affiliate of the employer; or (iii) any entity with which the applicant maintains an exclusive arrangement to act as a mortgage loan originator.

D. An individual shall not be considered to have passed a qualified written test unless he has correctly answered at least 75 percent of the test questions. An individual may take a test three consecutive times with each consecutive taking occurring at least 30 days after the preceding test. After failing three consecutive tests, an individual shall wait at least six months before retaking the test. A licensed mortgage loan originator who fails to maintain a valid license for a period of five years or longer, exclusive of any period during which such individual is a registered mortgage loan originator, shall retake the test and correctly answer at least 75 percent of the test questions.

E. An applicant who has successfully completed pre-licensing education and testing that is mandated by the Act and approved by the Registry for any state shall be deemed to have completed Virginia's pre-licensing education and testing requirements, other than any limited or separate state testing requirements relating to Virginia law and regulation as described in subsection B.

2009, cc. 273, 453, § 6.1-431.10; 2010, c. 794; 2012, cc. 52, 187.

§ 6.2-1710. Continuing education requirements.

A. A licensed mortgage loan originator shall complete annually at least eight hours of continuing education courses approved in accordance with subsection B, which shall include at least: (i) three hours related to federal law and regulations; (ii) two hours related to ethics, which shall include instruction about fraud, consumer protection, and fair lending issues; and (iii) two hours related to lending standards for the nontraditional mortgage product marketplace.

B. Continuing education courses shall be reviewed and approved by the Registry based upon reasonable standards. Review and approval of a continuing education course shall include review and approval of the course provider.

C. Nothing in this section shall preclude the provision of any continuing education course that has been approved by the Registry by: (i) the employer of the mortgage loan originator; (ii) an entity that is affiliated with the mortgage loan originator by an agency contract; or (iii) a subsidiary or affiliate of such employer or entity.

D. Continuing education courses may be offered in a classroom, online, or by any means approved by the Registry.

E. A licensed mortgage loan originator may only receive credit for a continuing education course in the year in which the course is taken and may not take the same approved course in the same or successive years to meet the annual requirements for continuing education.

F. A licensed mortgage loan originator who is an instructor of an approved continuing education course may receive credit for his annual continuing education requirement at the rate of two hours of credit for every one hour of teaching.

G. A licensed mortgage loan originator who has successfully completed Registry-approved continuing education courses that satisfy the requirements of subsection A for any state shall be deemed to have satisfied the continuing education requirements of this chapter.

2009, cc. 273, 453, § 6.1-431.11; 2010, c. 794.

§ 6.2-1711. Licenses; places of business; changes.

A. Each license shall state fully the name and address of record of the licensee. Each licensee shall be required to display proof of licensing upon request, and to prominently display at any location where he acts as a mortgage loan originator the telephone numbers and Internet addresses for the Registry and the Commission where consumers and other interested parties may confirm the status of his license. Licenses shall not be transferable or assignable, by operation of law or otherwise. Except as otherwise provided by the Commission, no licensee shall use any name, in acting as a mortgage loan originator, other than the name set forth on the license issued by the Commission.

B. Every licensee shall within 10 days notify the Commissioner, in writing, of any change of residential or business address and provide such other information with respect to any such change as the Commissioner may reasonably require.

C. Every license shall remain in force until it expires or has been surrendered, revoked, or suspended. The expiration, surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of the licensee. In addition:

1. Except as otherwise provided by the Commission, licenses shall expire at the end of each calendar year. A licensee may request renewal by (i) filing a license renewal application through the Registry, (ii) paying the annual license renewal fee prescribed in § 6.2-1714, (iii) obtaining the continuing education prescribed in § 6.2-1710, and (iv) furnishing such other information as may be required by the Commission;

2. The Commission shall renew an individual's license if the Commission finds that the individual has complied with the requirements of this chapter and continues to meet the conditions for initial licensure. If the Commission fails to make the findings required by this subdivision, the Commission shall not renew the individual's license. In determining whether to renew a license, the Commission shall consider whether the licensee has violated state or federal law; and

3. Notwithstanding any other provision of this chapter, the Commission may by regulation permit a former licensee to seek license reinstatement after the license expiration date by requesting renewal in accordance with subdivision 1 and paying a reinstatement fee as prescribed by the Commission.

2009, cc. 273, 453, § 6.1-431.12; 2010, c. 794; 2012, cc. 52, 187.

§ 6.2-1712. Repealed.

Repealed by Acts 2011, c. 435, cl. 3, effective July 1, 2012.

§ 6.2-1712.1. Inactive mortgage loan originator licenses.

A. Notwithstanding any other provision of this chapter, if the Commission finds that an individual has applied for a mortgage loan originator license and meets all applicable requirements for licensure except § 6.2-1703, then the Commission shall issue a mortgage loan originator license to the applicant. However, the license issued by the Commission shall be inactive by operation of law until the Commission has updated the licensee's status in the Registry pursuant to subsection D.

B. Notwithstanding any other provision of this chapter, if the Commission finds that an individual has requested renewal of his mortgage loan originator license in accordance with subsection C of § 6.2-1711 and meets all applicable requirements for license renewal except § 6.2-1703, then the Commission shall renew the individual's mortgage loan originator license. However, the license renewed by the Commission shall be inactive by operation of law until the Commission has updated the licensee's status in the Registry pursuant to subsection D.

C. If at any time a licensee ceases to be covered by a surety bond meeting the requirements of § 6.2-1703, then the individual's license shall be inactive by operation of law until the Commission has updated the licensee's status in the Registry pursuant to subsection D.

D. If a licensee's mortgage loan originator license is inactive by operation of law pursuant to this section, then the licensee shall not engage in the business of a mortgage loan originator until (i) the Commission has determined that the licensee is covered by a surety bond meeting the requirements of § 6.2-1703 and (ii) based upon its determination, the Commission has updated the licensee's status in the Registry to indicate that the licensee may engage in the business of a mortgage loan originator.

2016, c. 330; 2019, c. 740.

§ 6.2-1713. Investigations; examinations.

The Commission may, by its designated officers and employees, as often as it deems necessary, investigate and examine the business activities, premises, and records of any individual required to be licensed under this chapter insofar as they pertain to any activities for which a license is required by this chapter. In the course of such investigations and examinations, the individual being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all persons, premises, books, records, and information that the person making such investigation or examination deems necessary. For the foregoing purposes, the person making such investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned individuals, and compel the production of papers and objects of all kinds.

2009, cc. 273, 453, § 6.1-431.14; 2010, c. 794.

§ 6.2-1714. Annual fees.

A. In order to defray the costs of his examination, supervision, and regulation, every licensee shall pay an annual license renewal fee. The fee shall be $100 unless another amount is prescribed by the Commission. The renewal fee shall be paid by the licensee to the State Treasurer or through the Registry, as determined by the Commission, on or before the end of each license year.

B. When it becomes necessary to examine or investigate the books and records of an individual required to be licensed under this chapter at a location outside the Commonwealth, the individual shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement, the actual travel and reasonable living expenses incurred on account of his examination, supervision, and regulation, or shall pay a reasonable per diem rate approved by the Commission. Any sums due pursuant to this subsection shall be in addition to the annual fee prescribed in subsection A.

C. If an individual is an employee or exclusive agent of a person licensed under Chapter 16 (§ 6.2-1600 et seq.), the expenses referred to in subsection B shall be paid by the licensed mortgage lender or mortgage broker.

2009, cc. 273, 453, § 6.1-431.15; 2010, c. 794.

§ 6.2-1715. Advertising; use of a unique identifier.

A. No individual required to be licensed under this chapter shall use or cause to be published any advertisement that:

1. Contains any false, misleading, or deceptive statement or representation; or

2. Except as otherwise provided by the Commission, identifies a licensee by any name other than the name set forth on the license issued by the Commission.

B. No licensee shall use the unique identifier obtained from the Registry for any purpose other than the purposes of the Act and this chapter.

2009, cc. 273, 453, § 6.1-431.16; 2010, c. 794; 2012, cc. 52, 187.

§ 6.2-1716. Suspension or revocation of license.

The Commission may suspend or revoke any license issued under this chapter based upon:

1. Any ground sufficient for denial of the issuance of a license under this chapter;

2. Any violation of the provisions of this chapter or regulations adopted by the Commission pursuant thereto, or a violation of any other law or regulation applicable to the conduct of the licensee's licensed activities;

3. Conviction of a felony or misdemeanor involving fraud, misrepresentation, or deceit;

4. Entry of a judgment against a licensee involving fraud, misrepresentation, or deceit;

5. Entry of a federal or state administrative order against a licensee for violation of any law or any regulation applicable to the conduct of his licensed activities;

6. Refusal to permit an investigation or examination by the Commission;

7. Failure to pay any fee or assessment imposed by this chapter;

8. Failure to comply with any order of the Commission; or

9. Failure to maintain registration with, or a unique identifier from, the Registry.

2009, cc. 273, 453, § 6.1-431.17; 2010, c. 794.

§ 6.2-1717. Filing of written report with Commissioner; events affecting a licensee.

Within 15 days of becoming aware of the occurrence of any of the events listed below, a licensee shall file a written report with the Commissioner describing such event:

1. The institution of revocation or suspension proceedings against the licensee by any state or other governmental authority;

2. The denial of the opportunity to engage in business by any state or other governmental authority;

3. Any felony indictment of the licensee;

4. Any felony conviction of the licensee; and

5. Such other events as the Commission may determine and identify by regulation.

2009, cc. 273, 453, § 6.1-431.18; 2010, c. 794.

§ 6.2-1718. Notice of proposed suspension or revocation.

The Commission may not revoke or suspend the license of any licensee under this chapter unless it has given the licensee 21 days' notice in writing of the reasons for the proposed revocation or suspension and has given the licensee an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the licensee's last address on the Commission's records and shall state with particularity the basis for the contemplated action. Within 14 days of mailing the notice, the licensee may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not suspend or revoke the license except based upon findings made at such hearing. The hearing shall be conducted in accordance with the provisions of Title 12.1.

2009, cc. 273, 453, § 6.1-431.19; 2010, c. 794.

§ 6.2-1719. Civil penalties.

The Commission may impose a civil penalty not exceeding $2,500 upon any individual required to be licensed under this chapter who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter or any other law or regulation applicable to the licensee's activities. For the purposes of this section, each separate violation shall be subject to the civil penalty herein prescribed, and each day that an unlicensed individual engages in the business of a mortgage loan originator shall constitute a separate violation.

2009, cc. 273, 453, § 6.1-431.20; 2010, c. 794; 2012, cc. 52, 187.

§ 6.2-1720. Regulations; agreements between Commission and Registry.

A. The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulations, the Commission shall give reasonable notice of their content and shall afford interested parties an opportunity to present evidence and be heard, in accordance with the Commission's Rules.

B. The Commission shall, to the extent practicable, include in any written memorandum of understanding or other written agreement between the Commission and the Registry provisions substantially similar to the following:

1. Any organization serving as the administrator of the Registry or any officer or employee of any such entity shall implement and maintain an information security program that meets or exceeds federal and state standards pursuant to § 18.2-186.6 and that complies with the regulation guidelines promulgated under the Gramm-Leach-Bliley Act (15 U.S.C. § 6801 et seq.) for safeguarding personal information of mortgage loan originators and applicants;

2. The Registry shall not under any circumstances disclose to any third party any information pertaining to any pending or incompletely adjudicated regulatory matters;

3. The Registry shall develop, as requested by the Commission, a mortgage loan originator licensing test that may be limited to specific products and services; and

4. The Registry shall provide to the Commission summary statistical information by March 31 of each year relating to loan originator examinations taken by applicants for a mortgage loan originator license in the Commonwealth during the preceding calendar year.

C. Except as otherwise provided in the Act or this chapter, any requirement under federal or state law regarding the privacy or confidentiality of any information or material provided to the Registry, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, shall continue to apply to such information or material after the information or material has been disclosed to the Registry. Such information and material may be shared with all state and federal regulatory officials with mortgage industry oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal or state law. In addition:

1. Information or material that is subject to privilege or confidentiality under this subsection shall not be subject to: (i) disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the Commonwealth or (ii) subpoena or discovery, or admission into evidence, in any private civil action or administrative process, unless with respect to any privilege held by the Registry with respect to such information or material, the individual to whom such information or material pertains waives, in whole or in part, in the discretion of such individual, that privilege;

2. Any provision of the laws of the Commonwealth relating to the disclosure of confidential supervisory information or any information or material described in this subsection that is inconsistent with this subsection shall be superseded by the requirements of this subsection to the extent that such provision provides less confidentiality or a weaker privilege; and

3. This subsection shall not apply with respect to the information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against, mortgage loan originators that is included in the Registry for access by the public.

D. The Commission shall:

1. Annually review the proposed budget, fees, and audited financial statements of the Registry;

2. Annually, to the extent practicable, report to the House Committee on Labor and Commerce and the Senate Committee on Commerce and Labor on the operations of the Registry, including compliance with its established protocols for securing and safeguarding personal information in the Registry;

3. To the extent practicable, prepare, publicly announce, and publish a report, by no later than July 1 of each year, that summarizes statistical test results and demographic information to be prepared by the Registry or its test administrator; and

4. Report violations of this chapter, any enforcement actions thereunder, and other relevant information to the Registry on a regular basis.

2009, cc. 273, 453, § 6.1-431.21; 2010, c. 794; 2012, cc. 52, 187.

§ 6.2-1721. Cease and desist orders.

A. If the Commission determines that any mortgage loan originator required to be licensed hereunder has violated any provision of this chapter or any regulation adopted pursuant thereto, the Commission may, upon 21 days' notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the address of record in the Registry for such mortgage loan originator and shall state the grounds for the contemplated action.

B. Within 14 days after the mailing of the notice, the person named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not issue a cease and desist order except based upon findings made at the hearing. The hearing shall be conducted in accordance with the provisions of Title 12.1. The Commission may enforce compliance with any such order issued under this section by imposition and collection of such penalties as may be prescribed by Commission regulations.

2011, c. 435.

Chapter 18 - Short-term Loans

§ 6.2-1800. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Affiliate" means a person related to a licensee by common ownership or control, or any employee or agent of a licensee.

"Annual percentage rate" has the same meaning as in the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) and its implementing regulations, as they may be amended from time to time. All fees and charges payable directly or indirectly by a borrower to a licensee as a condition to a loan, including interest and the monthly maintenance fees authorized under § 6.2-1817, shall be included in the computation of the annual percentage rate.

"Check" means a draft drawn on the account of an individual at a depository institution.

"Depository institution" means a bank, savings institution, or credit union.

"Interest" means all charges payable directly or indirectly by a borrower to a licensee as a condition to a loan, including fees, service charges, and renewal charges, and any ancillary product sold in connection with a loan, but does not include the monthly maintenance fees, deposit item return fees, or late charges authorized under § 6.2-1817.

"Licensee" means a person to whom a license has been issued under this chapter.

"Loan amount" means the principal amount of a loan, exclusive of fees or charges.

"Principal" means any person who, directly or indirectly, owns or controls (i) 10 percent or more of the outstanding stock of a stock corporation or (ii) a 10 percent or greater interest in a nonstock corporation or a limited liability company.

"Short-term loan" means a loan made pursuant to this chapter.

2002, c. 897, § 6.1-444; 2005, c. 571; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1801. License requirement.

A. No person shall engage in the business of making loans to individuals for personal, family, household, or other nonbusiness purposes, and charge, contract for, or receive, directly or indirectly, on or in connection with any loan interest, charges, compensation, consideration, or expense that in the aggregate is greater than the interest permitted by § 6.2-303, whether or not the person has a location in the Commonwealth, except as provided and authorized by this chapter, Chapter 15 (§ 6.2-1500 et seq.), or Chapter 22 (§ 6.2-2200 et seq.) and without having first obtained a license under this chapter from the Commission.

B. No person shall engage in the business of arranging or brokering short-term loans for any consumer residing in the Commonwealth, whether or not the person has an office or conducts business at a location in the Commonwealth.

C. The provisions of subsection A shall apply to any person who seeks to evade its application by any device, subterfuge, or pretense whatsoever, including:

1. The loan, forbearance, use, or sale of (i) credit, as guarantor, surety, endorser, comaker, or otherwise; (ii) money; (iii) goods; or (iv) things in action;

2. The use of collateral or related sales or purchases of goods or services, or agreements to sell or purchase, whether real or pretended; receiving or charging compensation for goods or services, whether or not sold, delivered, or provided; and

3. The real or pretended negotiation, arrangement, or procurement of a loan through any use or activity of a third person, whether real or fictitious.

D. Any loan made in violation of this section is void, and no person shall have the right to collect, receive, or retain any principal, interest, fees, or other charges in connection with the loan.

2002, c. 897, § 6.1-445; 2005, c. 571; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1802. Applicability.

The provisions of this chapter shall not apply to any depository institution that does not elect to become licensed under this chapter. Electing to become licensed under this chapter shall constitute a waiver of the benefit of any and all laws of the Commonwealth and other states and federal laws preemptive of, or inconsistent with, the provisions of this chapter.

2002, c. 897, § 6.1-446; 2010, c. 794.

§ 6.2-1803. Application for license; form; content; fee.

A. An application for a license under this chapter shall be made in writing, under oath and on a form provided by the Commissioner.

B. The application shall set forth:

1. The name and address of the applicant;

2. If the applicant is a firm or partnership, the name and address of each member of the firm or partnership;

3. If the applicant is a corporation or a limited liability company, the name and address of each officer, director, registered agent, and each principal;

4. The addresses of the locations of the offices to be approved; and

5. Such other information concerning the financial responsibility, background, experience and activities of the applicant and its members, officers, directors, and principals as the Commissioner may require.

C. The application shall be accompanied by payment of an application fee of $500 or other reasonable amount that the Commission prescribes by regulation.

D. The application fee shall not be refundable in any event. The fee shall not be abated by surrender, suspension, or revocation of the license.

2002, c. 897, § 6.1-447; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1804. Bond required.

The application for a license shall be accompanied by a bond filed with the Commissioner with corporate surety authorized to execute such bond in the Commonwealth, in the sum of $10,000 per office, or such greater sum as the Commission may require, but not to exceed a total of $500,000. The form of such bond shall be approved by the Commission. The bond shall be continuously maintained thereafter in full force. The bond shall be conditioned upon the applicant or licensee performing all written agreements with borrowers or prospective borrowers, correctly and accurately accounting for all funds received by him in his licensed business, and conducting his licensed business in conformity with this chapter and all other applicable law. Any person who may be damaged by noncompliance of the licensee with any condition of such bond may proceed on such bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

2002, c. 897, § 6.1-448; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1805. Investigation of applications.

The Commissioner may make such investigations as he deems necessary to determine if the applicant has complied with all applicable provisions of law and regulations adopted thereunder.

2002, c. 897, § 6.1-449; 2010, c. 794.

§ 6.2-1806. Qualifications.

A. Upon the filing and investigation of an application for a license, and compliance by the applicant with the provisions of §§ 6.2-1803 and 6.2-1804, the Commission shall issue and deliver to the applicant the license applied for to engage in business under this chapter at the offices specified in the application if it finds:

1. That the financial responsibility, character, reputation, experience, and general fitness of the applicant and its members, senior officers, directors, and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest and in accordance with law; and

2. That the applicant has unencumbered liquid assets per office available for the operation of the business of at least $25,000.

B. If the Commission fails to make such findings, no license shall be issued and the Commissioner shall notify the applicant of the denial and the reasons for such denial.

2002, c. 897, § 6.1-450; 2010, c. 794.

§ 6.2-1807. Licenses; places of offices; changes.

A. Each license shall:

1. State the address of each approved office at which the business is to be conducted;

2. State fully the name of the licensee; and

3. Be prominently posted in each office of the licensee.

B. No licensee shall:

1. Use any name other than the name set forth on the license issued by the Commission; or

2. Open an additional office or relocate any office without prior approval of the Commission.

C. Applications for Commission approval to open an additional office or relocate any office shall be made in writing on a form provided by the Commissioner and shall be accompanied by payment of a $150 nonrefundable application fee or other reasonable amount as the Commission may prescribe by regulation. The application shall be approved unless the Commission finds that the applicant does not have the required liquid assets or has not conducted business under this chapter efficiently, fairly, in the public interest, and in accordance with law. The application shall be deemed approved if notice to the contrary has not been mailed by the Commission to the applicant within 30 days of the date the application is received by the Commission. After approval, the applicant shall give written notice to the Commissioner within 10 days of the commencement of business at the additional office or relocated office.

D. Every licensee shall within 10 days notify the Commissioner, in writing, of the closing of any office and of the name, address, and position of each new senior officer, member, partner, or director and provide such other information with respect to any such change as the Commissioner may reasonably require.

E. Licenses shall:

1. Not be transferable or assignable, by operation of law or otherwise; and

2. Remain in force until they have been surrendered, revoked, or suspended. The surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of the licensee.

2002, c. 897, § 6.1-451; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1808. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire, directly or indirectly, 25 percent or more of the voting shares of a corporation or 25 percent or more of the ownership of any other person licensed to conduct business under this chapter unless such person first:

1. Files an application with the Commission in such form as the Commissioner may prescribe from time to time;

2. Delivers such other information to the Commissioner as the Commissioner may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, principals and members, and of any proposed new directors, senior officers, principals or members of the licensee; and

3. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant, its members if applicable, its directors, senior officers and principals, and any proposed new directors, members, senior officers and principals have the financial responsibility, character, reputation, experience and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by order of the Commissioner reciting the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

C. The provisions of this section shall not apply to (i) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person licensed by this chapter, (ii) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person affiliated through common ownership with the licensee, or (iii) the acquisition of an interest in a licensee by a person by bequest, descent, survivorship or operation of law. The person acquiring an interest in a licensee in a transaction that is exempt from filing an application by this subsection shall send written notice to the Commissioner of such acquisition within 30 days of its closing.

2002, c. 897, § 6.1-452; 2010, c. 794.

§ 6.2-1809. Retention of books, accounts, and records.

Every licensee shall maintain in its approved offices such books, accounts and records as the Commission may reasonably require in order to determine whether such licensee is complying with the provisions of this chapter and regulations adopted in furtherance thereof. Such books, accounts and records shall be maintained apart and separate from any other business in which the licensee is involved. Such records relating to short-term loans, including copies of checks given to a licensee as security for such loans, shall be retained for at least three years after final payment is made on any loan.

2002, c. 897, § 6.1-453; 2004, c. 295; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1810. Loan database.

A. The Commission shall certify and contract with one or more third parties to develop, implement, and maintain a real-time, Internet-accessible database that contains such short-term loan information as the Commission may require from time to time by administrative rule or policy statement.

B. The following provisions shall apply to the database:

1. Before making a short-term loan, a licensee shall query the database through a Commission-certified database provider and shall retain evidence of the query for the Commission's supervisory review. The database shall allow a licensee to make a short-term loan only if making the loan is permissible under the provisions of this chapter. During any period that the database is unavailable due to technical problems beyond the licensee's control, a licensee may rely on the loan applicant's written representations, rather than the database's information, to verify that making the loan applied for is permissible under the provisions of this chapter. Because a licensee may rely on the accuracy of the applicant's representations and the database's information, a licensee is not subject to any administrative penalty or civil liability if that information is later determined to be inaccurate.

2. The database provider shall maintain the database, take all actions it deems necessary to protect the confidentiality and security of the information contained in the database, be responsible for the confidentiality and security of such information, and own the information contained in the database. The Commission shall have access to and utilize the database as a supervision and enforcement tool to ensure licensees' compliance with the provisions of this chapter.

3. Upon a licensee's query, the database shall advise the licensee whether the applicant is eligible for a new short-term loan and, if the applicant is ineligible, the reason for such ineligibility. If the database advises the licensee that the applicant is ineligible for a short-term loan, then the applicant shall direct any inquiry regarding the specific reason for such ineligibility to the database provider rather than to the licensee. The information contained in the database is confidential and exempt from the Freedom of Information Act (§ 2.2-3700 et seq.).

4. If a licensee and borrower consummate a loan, then the licensee shall pay a fee to defray the costs of submitting the database inquiry. The amount of the database inquiry fee shall be calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to actual cost of the operation of the database. If a licensee submits a database inquiry but does not consummate a loan with the applicant, then the licensee shall not pay the database inquiry fee. Each licensee shall remit all database inquiry fees directly to the database provider on a weekly basis.

5. If a borrower enters into a short-term loan or pays or otherwise satisfies a short-term loan in full, then the licensee making the loan shall report such event or other information to the database not later than the close of business on the date of such event.

2008, cc. 849, 876, § 6.1-453.1; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1811. Annual report.

A. Each licensee under this chapter shall annually, on or before March 25, file a written report with the Commissioner containing such information as the Commissioner may require concerning his business and operations during the preceding calendar year as to each approved office. Reports shall be made under oath and shall be in the form prescribed by the Commissioner.

B. The Commissioner shall publish annually and make available to the public an analysis of the information required under this section and other information the Commissioner may choose to include. The published analysis shall include all of the following:

1. The total number of borrowers, loans, defaulted loans, and charged-off loans and the total dollar value of the charged-off loans;

2. The average loan size, average contracted annual percentage rate, average contracted loan charges, average loan charges actually paid, total contracted loan charges, and total loan charges actually paid;

3. The total number of deposit item return fees and the total dollar value of those charges;

4. The total number of licensee business locations and the average number of borrowers per location; and

5. A summary of pending and completed enforcement actions, which shall include lists of suspended or revoked licenses, cease and desist orders, and civil penalties pursuant to this chapter.

2002, c. 897, § 6.1-454; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1812. Other reporting requirements.

A. A licensee shall file a written report with the Commissioner within 15 days following the occurrence of any of the following:

1. The filing of bankruptcy, reorganization or receivership proceedings by or against the licensee;

2. The institution of administrative or regulatory proceedings against the licensee by any governmental authority;

3. Any felony indictments of the licensee or any of its members, partners, directors, officers, or principals;

4. Any felony conviction of the licensee or any of its members, partners, directors, officers, or principals; and

5. Such other event as the Commission may prescribe by regulation.

B. The report shall be in writing and describe the event and its expected impact on the business of the licensee.

2002, c. 897, § 6.1-455; 2010, c. 794.

§ 6.2-1813. Investigations; examinations.

The Commission may, as often as it deems necessary, investigate and examine the affairs, business, premises and records of any person licensed or required to be licensed under this chapter or any person who may be violating § 6.2-1801. Examinations of licensees shall be conducted at least once in each three-year period. In the course of such investigations and examinations, the owners, members, officers, directors, partners, and employees of such person being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary. For the foregoing purposes, the person making such investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

2002, c. 897, § 6.1-456; 2003, c. 593; 2010, c. 794.

§ 6.2-1814. Annual fees.

A. To defray the costs of examination, supervision and regulation, every licensee shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the business volume of licensees, the actual costs of their examinations, and to other factors relating to their supervision and regulation. All such fees shall be assessed on or before September 15 for every calendar year. All such fees shall be paid by the licensee to the State Treasurer on or before October 15 following each assessment.

B. In addition to the annual fee prescribed in subsection A, when it becomes necessary to examine or investigate the books and records of a licensee at a location outside the Commonwealth, the licensee shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement, the actual travel and reasonable living expenses incurred on account of its examination, supervision and regulation, or shall pay at a reasonable per diem rate approved by the Commission.

2002, c. 897, § 6.1-457; 2010, c. 794.

§ 6.2-1815. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules.

2002, c. 897, § 6.1-458; 2010, c. 794.

§ 6.2-1816. (Effective until January 1, 2024) Required and prohibited business methods.

Each licensee shall comply with the following requirements and prohibitions:

1. A licensee shall not make a loan that does not comply with § 6.2-1816.1.

2. A licensee shall not charge, collect, or receive, directly or indirectly, credit insurance premiums, charges for any ancillary product sold, charges for disbursing loan proceeds or refunds including check-cashing charges and any other charges for negotiating forms of payment other than cash, charges for brokering or obtaining a loan, or any fees, interest, or charges in connection with a loan, other than fees and charges permitted by § 6.2-1817.

3. A licensee shall not obtain any agreement from the borrower (i) giving the licensee or any third person power of attorney or authority to confess judgment for the borrower; (ii) authorizing the licensee or any third party to bring suit against the borrower in a court outside the Commonwealth; or (iii) waiving the borrower's right to legal recourse or any other right the borrower has under any otherwise applicable provision of state or federal law.

4. A licensee shall not make a loan to a person if that person is obligated upon any loan to a person licensed under Chapter 22 (§ 6.2-2200 et seq.). Prior to making a loan, a licensee shall make a reasonable attempt to verify the borrower's eligibility under this subsection that includes reviewing the files of any affiliate that is licensed under Chapter 22. Unless the Commission requires otherwise by administrative rule or policy statement, a licensee may rely on the loan applicant's written representations with respect to the applicant's obligations to lenders that are licensed under Chapter 22 (§ 6.2-2200 et seq.) but are not affiliates of the licensee, and a licensee is not subject to any administrative penalty or civil liability if such representations are later determined to be inaccurate.

5. A licensee shall not cause any person to be obligated to the licensee in any capacity at any time in the principal amount of more than $2,500.

6. Except as provided in § 6.2-1818.1, a licensee shall not refinance, renew, or extend any short-term loan or make a loan to a person if the loan would cause the person to have more than one short-term loan from any licensee outstanding at the same time.

7. A licensee shall not cause a borrower to be obligated upon more than one loan at any time.

8. A check accepted by a licensee as security for any loan shall be dated no earlier than the date of the first required loan payment shown in the loan agreement.

9. Notwithstanding any provision of § 8.01-226.10 to the contrary, a licensee shall not threaten, or cause to be instigated, criminal proceedings against a borrower if a check given as security for a loan is dishonored or for any reason related to the borrower's failure to pay any sum due under a loan agreement.

10. A licensee shall not (i) accept the title or registration of a vehicle, real or personal property, or any interest in any property other than a check payable to the licensee as security for a loan; (ii) create or accept any remotely created check, as defined in 12 C.F.R. § 229.2(fff), in connection with a loan; (iii) draft funds electronically from a borrower's account without express written authorization from the borrower; or (iv) fail to stop attempts to draft funds electronically from a borrower's account upon request from the borrower or his agent. Nothing in this section shall prohibit the conversion of a negotiable instrument into an electronic form for processing through the automated clearing house system.

11. A licensee shall not present a check, negotiable order of withdrawal, share draft, or other negotiable instrument that has been previously presented by the licensee and subsequently returned dishonored for any reason, unless the licensee obtains new written authorization from the borrower to present the previously returned item.

12. A licensee shall not attempt to draft funds electronically from a borrower's account after two consecutive attempts have failed, unless the licensee obtains new written authorization from the borrower to transfer or withdraw funds electronically from the borrower's account.

13. A licensee shall not make a loan to a borrower to enable the borrower to (i) pay for any other product or service sold at the licensee's office location or (ii) repay any amount owed to the licensee or an affiliate of the licensee in connection with another credit transaction.

14. Loan proceeds shall be disbursed in cash or by the licensee's business check. No fee shall be charged by the licensee or an affiliate for cashing a loan proceeds check.

15. A check given as security for a loan shall not be negotiated to a third party.

16. Upon receipt of a check given as security for a loan, the licensee shall stamp the check with an endorsement stating: "This check is being negotiated as part of a short-term loan pursuant to Chapter 18 (§ 6.2-1800 et seq.) of Title 6.2 of the Code of Virginia, and any holder of this check takes it subject to all claims and defenses of the maker."

17. Before entering into a short-term loan, the licensee shall provide each borrower with a pamphlet, in form consistent with regulations adopted by the Commission, explaining in plain language the rights and responsibilities of the borrower and providing a toll-free number at the Commission for assistance with complaints.

18. Each licensee shall conspicuously post in each approved office (i) a schedule of fees and interest charges, which shall include examples using a $300 loan repaid in three months, a $500 loan repaid in five months, and a $1,000 loan repaid in 10 months, and (ii) a notice containing the following statement: "If you wish to file a complaint against us, you may contact the Bureau of Financial Institutions at [insert contact information]." The Commission shall furnish licensees with the appropriate contact information.

19. A licensee shall not knowingly make a short-term loan to a person who is a member of the military services of the United States or the spouse or other dependent of a member of the military services of the United States. Prior to making a short-term loan, every licensee shall inquire of every prospective borrower if he is a member of the military services of the United States or the spouse or other dependent of a member of the military services of the United States. The loan documents shall include verification that the borrower is not a member of the military services of the United States or the spouse or other dependent of a member of the military services of the United States.

20. In collecting or attempting to collect a short-term loan, a licensee shall comply with the restrictions and prohibitions applicable to debt collectors contained in the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) regarding harassment or abuse, false or misleading misrepresentations, and unfair practices in collections.

21. A licensee shall not contact a borrower for any reason other than (i) for the borrower's benefit regarding upcoming payments, options for obtaining loans, payment options, payment due dates, the effect of default, or, after default, receiving payments or other actions permitted by the licensee; (ii) to advise the borrower of missed payments or dishonored checks; or (iii) to assist the transmittal of payments via a third-party mechanism.

22. A short-term loan agreement shall not be sold or otherwise assigned to any other person who is not also a licensee, and if a loan agreement or its servicing is sold or assigned to another licensee, the buyer or assignee of the loan agreement shall be subject to the same obligations under this chapter that apply to the selling or assigning licensee. If a licensee sells or assigns a short-term loan or its servicing, the licensee shall provide to the borrower written notice and the information needed to make future payments no later than 10 days before the borrower's next payment due date.

23. A licensee shall not make a loan to a borrower that includes an acceleration clause or demand feature that permits the licensee, in the event the borrower fails to meet the repayment terms for any outstanding balance, to terminate the loan in advance of the original maturity date and to demand repayment of the entire outstanding balance, unless both of the following conditions are met: (i) not earlier than 10 days after the borrower's payment was due, the licensee provides written notice to the borrower of the termination of the loan and (ii) in addition to the outstanding balance, the licensee collects only prorated interest and the fees earned up to termination of the loan. For purposes of this subdivision, the outstanding balance and prorated interest and fees shall be calculated as if the borrower had voluntarily prepaid the loan in full on the date of termination.

24. A licensee may not file or initiate a legal proceeding of any kind against a borrower until 60 days after the date of default on a short-term loan, during which period the licensee and borrower may voluntarily enter into a repayment arrangement.

25. A licensee shall not recommend to a borrower that the borrower obtain a loan for a dollar amount that is higher than the borrower has requested.

26. A licensee may not engage in any unfair, misleading, deceptive, or fraudulent acts or practices in the conduct of its business.

2002, c. 897, § 6.1-459; 2003, c. 593; 2004, c. 295; 2005, c. 571; 2008, cc. 849, 876; 2010, c. 794; 2016, c. 501; 2020, cc. 1215, 1258.

§ 6.2-1816.1. Loan terms and conditions.

A licensee may engage in the business of making short-term loans, provided that each loan meets all of the following conditions:

1. The total amount of the loan does not exceed $2,500.

2. The minimum duration of the loan is four months and the maximum duration of the loan is 24 months; however, the minimum duration of the loan may be less than four months if the total monthly payment on the loan does not exceed the greater of (i) an amount that is five percent of the borrower's verified gross monthly income or (ii) six percent of the borrower's verified net monthly income.

3. The loan is made pursuant to a written loan contract that sets forth the terms and conditions of the loan, which shall be signed by the borrower and a person authorized by the licensee to sign such agreements and dated the same day the loan is made and disbursed. A copy of the signed loan contract shall be provided to the borrower. The loan contract shall disclose in a clear and concise manner all of the following:

a. The principal amount of the loan and the total amount of fees and charges the borrower will be required to pay in connection with the loan pursuant to the loan contract;

b. The amount of each payment of principal and interest, when each payment is due, the total number of payments that the borrower will be required to make under the loan contract, and the loan's maturity date;

c. If the licensee receives a check as security for the loan, evidence of receipt from the borrower of a check, stating the amount of the check and terms upon which the check may be presented for payment;

d. A statement, printed in a minimum font size of 10 points, that informs the borrower that complaints regarding the loan or lender may be submitted to the Bureau and includes the correct telephone number, website address, and mailing address for the Bureau;

e. Any disclosures required under the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) and its implementing regulations, as they may be amended from time to time;

f. The annual percentage rate;

g. A statement, printed in a minimum font size of 10 points, as follows: "This loan is made pursuant to Chapter 18 of Title 6.2 of the Code of Virginia. You have the right to rescind or cancel this loan by returning the loan proceeds check or the originally contracted loan amount by 5 p.m. of the third business day immediately following the day you enter into this contract.";

h. A statement, printed in a minimum font size of 10 points, as follows: "Electronic payment is optional. You have the right to revoke or remove your authorization for electronic payment at any time.";

i. The borrower's mailing address.

j. Such other information relating to the loan as the Commission shall determine, by regulation, is necessary to ensure that the borrower is provided adequate notice of the relevant provisions of the loan.

4. The loan is a precomputed loan and is payable in substantially equal installments consisting of principal, fees, and interest combined. For purposes of this section, "precomputed loan" means a loan in which the debt is a sum comprising the principal amount and the amount of fees and interest computed in advance on the assumption that all scheduled payments will be made when due.

5. The loan may be rescinded or canceled on or before 5 p.m. of the third business day immediately following the day of the loan transaction upon the borrower returning the original loan proceeds check or paying to the licensee, in the form of cash or other good funds instrument, the loan proceeds.

2020, cc. 1215, 1258.

§ 6.2-1816. (Effective January 1, 2024) Required and prohibited business methods.

Each licensee shall comply with the following requirements and prohibitions:

1. A licensee shall not make a loan that does not comply with § 6.2-1816.1.

2. A licensee shall not charge, collect, or receive, directly or indirectly, credit insurance premiums, charges for any ancillary product sold, charges for disbursing loan proceeds or refunds including check-cashing charges and any other charges for negotiating forms of payment other than cash, charges for brokering or obtaining a loan, or any fees, interest, or charges in connection with a loan, other than fees and charges permitted by § 6.2-1817.

3. A licensee shall not obtain any agreement from the borrower (i) giving the licensee or any third person power of attorney or authority to confess judgment for the borrower; (ii) authorizing the licensee or any third party to bring suit against the borrower in a court outside the Commonwealth; or (iii) waiving the borrower's right to legal recourse or any other right the borrower has under any otherwise applicable provision of state or federal law.

4. A licensee shall not make a loan to a person if that person is obligated upon any loan to a person licensed under Chapter 22 (§ 6.2-2200 et seq.). Prior to making a loan, a licensee shall make a reasonable attempt to verify the borrower's eligibility under this subsection that includes reviewing the files of any affiliate that is licensed under Chapter 22. Unless the Commission requires otherwise by administrative rule or policy statement, a licensee may rely on the loan applicant's written representations with respect to the applicant's obligations to lenders that are licensed under Chapter 22 (§ 6.2-2200 et seq.) but are not affiliates of the licensee, and a licensee is not subject to any administrative penalty or civil liability if such representations are later determined to be inaccurate.

5. A licensee shall not cause any person to be obligated to the licensee in any capacity at any time in the principal amount of more than $2,500.

6. Except as provided in § 6.2-1818.1, a licensee shall not refinance, renew, or extend any short-term loan or make a loan to a person if the loan would cause the person to have more than one short-term loan from any licensee outstanding at the same time.

7. A licensee shall not cause a borrower to be obligated upon more than one loan at any time.

8. A check accepted by a licensee as security for any loan shall be dated no earlier than the date of the first required loan payment shown in the loan agreement.

9. Notwithstanding any provision of § 8.01-226.10 to the contrary, a licensee shall not threaten, or cause to be instigated, criminal proceedings against a borrower if a check given as security for a loan is dishonored or for any reason related to the borrower's failure to pay any sum due under a loan agreement.

10. A licensee shall not (i) accept the title or registration of a vehicle, real or personal property, or any interest in any property other than a check payable to the licensee as security for a loan; (ii) create or accept any remotely created check, as defined in 12 C.F.R. § 229.2(fff), in connection with a loan; (iii) draft funds electronically from a borrower's account without express written authorization from the borrower; or (iv) fail to stop attempts to draft funds electronically from a borrower's account upon request from the borrower or his agent. Nothing in this section shall prohibit the conversion of a negotiable instrument into an electronic form for processing through the automated clearing house system.

11. A licensee shall not present a check, negotiable order of withdrawal, share draft, or other negotiable instrument that has been previously presented by the licensee and subsequently returned dishonored for any reason, unless the licensee obtains new written authorization from the borrower to present the previously returned item.

12. A licensee shall not attempt to draft funds electronically from a borrower's account after two consecutive attempts have failed, unless the licensee obtains new written authorization from the borrower to transfer or withdraw funds electronically from the borrower's account.

13. A licensee shall not make a loan to a borrower to enable the borrower to (i) pay for any other product or service sold at the licensee's office location or (ii) repay any amount owed to the licensee or an affiliate of the licensee in connection with another credit transaction.

14. Loan proceeds shall be disbursed in cash or by the licensee's business check. No fee shall be charged by the licensee or an affiliate for cashing a loan proceeds check.

15. A check given as security for a loan shall not be negotiated to a third party.

16. Upon receipt of a check given as security for a loan, the licensee shall stamp the check with an endorsement stating: "This check is being negotiated as part of a short-term loan pursuant to Chapter 18 (§ 6.2-1800 et seq.) of Title 6.2 of the Code of Virginia, and any holder of this check takes it subject to all claims and defenses of the maker."

17. Before entering into a short-term loan, the licensee shall provide each borrower with a pamphlet, in form consistent with regulations adopted by the Commission, explaining in plain language the rights and responsibilities of the borrower and providing a toll-free number at the Commission for assistance with complaints.

18. Each licensee shall conspicuously post in each approved office (i) a schedule of fees and interest charges, which shall include examples using a $300 loan repaid in three months, a $500 loan repaid in five months, and a $1,000 loan repaid in 10 months, and (ii) a notice containing the following statement: "If you wish to file a complaint against us, you may contact the Bureau of Financial Institutions at [insert contact information]." The Commission shall furnish licensees with the appropriate contact information.

19. A licensee shall not knowingly make a short-term loan to a person who is a member of the military services of the United States or the spouse or other dependent of a member of the military services of the United States. Prior to making a short-term loan, every licensee shall inquire of every prospective borrower if he is a member of the military services of the United States or the spouse or other dependent of a member of the military services of the United States. The loan documents shall include verification that the borrower is not a member of the military services of the United States or the spouse or other dependent of a member of the military services of the United States.

20. In collecting or attempting to collect a short-term loan, a licensee shall comply with the restrictions and prohibitions applicable to debt collectors contained in the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) regarding harassment or abuse, false or misleading misrepresentations, and unfair practices in collections.

21. A licensee shall not contact a borrower for any reason other than (i) for the borrower's benefit regarding upcoming payments, options for obtaining loans, payment options, payment due dates, the effect of default, or, after default, receiving payments or other actions permitted by the licensee; (ii) to advise the borrower of missed payments or dishonored checks; or (iii) to assist the transmittal of payments via a third-party mechanism.

22. A short-term loan agreement shall not be sold or otherwise assigned to any other person who is not also a licensee, and if a loan agreement or its servicing is sold or assigned to another licensee, the buyer or assignee of the loan agreement shall be subject to the same obligations under this chapter that apply to the selling or assigning licensee. If a licensee sells or assigns a short-term loan or its servicing, the licensee shall provide to the borrower written notice and the information needed to make future payments no later than 10 days before the borrower's next payment due date.

23. A licensee shall not make a loan to a borrower that includes an acceleration clause or demand feature that permits the licensee, in the event the borrower fails to meet the repayment terms for any outstanding balance, to terminate the loan in advance of the original maturity date and to demand repayment of the entire outstanding balance, unless both of the following conditions are met: (i) not earlier than 10 days after the borrower's payment was due, the licensee provides written notice to the borrower of the termination of the loan and (ii) in addition to the outstanding balance, the licensee collects only prorated interest and the fees earned up to termination of the loan. For purposes of this subdivision, the outstanding balance and prorated interest and fees shall be calculated as if the borrower had voluntarily prepaid the loan in full on the date of termination.

24. A licensee may not file or initiate a legal proceeding of any kind against a borrower until 60 days after the date of default on a short-term loan, during which period the licensee and borrower may voluntarily enter into a repayment arrangement.

25. A licensee shall not recommend to a borrower that the borrower obtain a loan for a dollar amount that is higher than the borrower has requested.

26. A licensee may not engage in any unfair, misleading, deceptive, or fraudulent acts or practices in the conduct of its business.

27. A licensee shall include as part of every loan application a question regarding whether the potential borrower has been approached, including via telephone or electronic means, by any person to send money in consideration of receiving money via a government or lottery organization.

2002, c. 897, § 6.1-459; 2003, c. 593; 2004, c. 295; 2005, c. 571; 2008, cc. 849, 876; 2010, c. 794; 2016, c. 501; 2020, cc. 1215, 1258; 2023, c. 287.

§ 6.2-1817. Authorized fees and charges.

A. A licensee may charge, collect, and receive only the following fees and charges in connection with a short-term loan, provided such fees and charges are set forth in the written loan contract described in § 6.2-1816.1:

1. Interest at a simple annual rate not to exceed 36 percent;

2. Subject to § 6.2-1817.1, a monthly maintenance fee that does not exceed the lesser of eight percent of the originally contracted loan amount or $25, provided the fee is not added to the loan balance on which interest is charged;

3. Any deposit item return fee incurred by the licensee, not to exceed $25, if a borrower's check or electronic draft is returned because the account on which it was drawn was closed by the borrower or contained insufficient funds, or the borrower stopped payment of the check or electronic draft, provided that the terms and conditions upon which such fee will be charged to the borrower are set forth in the written loan contract described in § 6.2-1816.1; and

4. Damages and costs to which the licensee may become entitled to by law in connection with any civil action to collect a loan after default, except that the total amount of damages and costs shall not exceed the originally contracted loan amount.

B. A licensee may impose a late charge according to the provisions of § 6.2-400 provided, however, that the late charge shall not exceed $20.

2002, c. 897, § 6.1-460; 2008, cc. 849, 876; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1817.1. Inflation adjustment of maximum monthly maintenance fee.

The Commission may, from time to time, by regulation, adjust the dollar amount of $25 specified in subsection A of § 6.2-1817 to reflect the rate of inflation from the previous date that the dollar amount was established, as measured by the Consumer Price Index or other method of measuring the rate of inflation that the Commission determines is reliable and generally accepted.

2020, cc. 1215, 1258.

§ 6.2-1818. Repealed.

Repealed by Acts 2020, cc. 1215 and 1258, cl. 2, effective January 1, 2021.

§ 6.2-1818.1. Refinancing of short-term loans.

Subject to subsection F of § 6.2-1818.2, a licensee may refinance a short-term loan, provided that the refinanced loan is also a short-term loan.

2020, cc. 1215, 1258.

§ 6.2-1818.2. Statement of balance due; repayment and refunds.

A. The licensee shall, upon the request of the borrower or his agent, provide a statement of balance due on a short-term loan.

B. A borrower shall be permitted to make partial payments, in increments of not less than $5, on the loan at any time prior to maturity, without charge. The licensee shall give the borrower dated receipts for each payment made, which shall state the updated balance due on the loan.

C. When providing a statement of balance due on the loan, the licensee shall state the amount required to discharge the borrower's obligation in full as of the date the notice is provided and for each of the next three business days following that date. If the licensee cannot reasonably supply a firm statement of balance due when requested or required, the licensee may provide a good faith estimate of the balance due immediately and provide to the borrower or his agent a firm statement of balance due within two business days.

D. The licensee shall provide any statement of balance due verbally and in writing, and shall not fail to provide the information by phone upon the request of the borrower or his agent.

E. A licensee shall not fail to accept cash or other good funds instrument from the borrower, or a third party when submitted on behalf of the borrower, for repayment of a short-term loan in full or in part. Payments shall be credited by the licensee on the date received.

F. Notwithstanding any other provision of law, if a short-term loan is prepaid in full or refinanced prior to the loan's maturity date, the licensee shall refund to the borrower a prorated portion of fees and charges based on a ratio of the number of days the loan was outstanding and the number of days for which the loan was originally contracted. For purposes of this section, all charges made in connection with the loan shall be included when calculating the loan charges except for deposit item return fees and late charges authorized under § 6.2-1817.

G. If a licensee presents a check held as security for a loan, the licensee shall refund any amount received that is in excess of the payment due on the loan as of the day the licensee presents the check. For purposes of this subsection, the payment due on the loan shall be no more than the amount of unpaid payments and fees that have already come due according to the loan contract or, if applicable, the amount due according to a valid contractual acceleration clause or demand feature as described in subdivision 23 of § 6.2-1816.

H. The licensee shall provide any refund due to a borrower in the form of cash or business check as soon as reasonably possible and not later than two business days after receiving payment from the borrower.

I. Upon repayment of the loan in full, the licensee shall mark the original loan agreement with the word "paid" or "canceled," return it to the borrower, and retain a copy in its records.

2020, cc. 1215, 1258.

§ 6.2-1818.3. Restriction on certain fees and charges.

Notwithstanding any provision of this chapter to the contrary, a licensee shall not contract for, charge, collect, or receive in connection with a short-term loan a total amount of fees and charges that exceeds either (i) 50 percent of the originally contracted loan amount, if the originally contracted loan amount was $1,500 or less or (ii) 60 percent of the originally contracted loan amount, if the originally contracted loan amount was greater than $1,500. For purposes of this section, all charges made in connection with the loan shall be included when calculating the total loan charges except for deposit item return fees and late charges authorized under § 6.2-1817.

2020, cc. 1215, 1258.

§ 6.2-1818.4. Verification of borrower's income.

Before initiating a short-term loan transaction with a borrower, a licensee shall make a reasonable attempt to verify the borrower's income. At a minimum, the licensee shall obtain from the borrower one or more recent pay stubs or other written evidence of recurring income, such as a bank statement. The written evidence shall include at least one document that, when presented to the licensee, is dated not earlier than 45 days prior to the borrower's initiation of the short-term loan transaction.

2020, cc. 1215, 1258.

§ 6.2-1819. Advertising.

A. No person licensed or required to be licensed under this chapter shall use or cause to be published any advertisement that (i) contains any false, misleading or deceptive statement or representation; or (ii) identifies the person by any name other than the name set forth on the license issued by the Commission.

B. Any advertising materials used to promote short-term loans that includes the amount of any payment, expressed either as a percentage or dollar amount, or the amount of any finance charge, shall also include a statement of the interest, fees and charges, expressed as an annual percentage rate, payable using examples of a $300 loan repaid in three months, a $500 loan repaid in five months, and a $1,000 loan repaid in 10 months.

C. In any print media advertisement, including any website, used to promote short-term loans, the disclosure statements described in subsection B shall be conspicuous. "Conspicuous" shall have the meaning set forth in subdivision (a) (14) of § 59.1-501.2. If a single advertisement consists of multiple pages, folds, or faces, the disclosure requirement applies only to one page, fold, or face. In a television advertisement used to promote short-term loans, the visual disclosure legend shall include 20 scan lines in size. In a radio advertisement or advertisement communicated by telephone used to promote short-term loans, the disclosure statement shall last at least two seconds and the statement shall be spoken so that its contents may be easily understood.

2002, c. 897, § 6.1-462; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1820. Other business.

No licensee shall conduct the business of making short-term loans under this chapter at any office, suite, room, or other place of business where any other business is solicited or conducted except a registered check cashing business, a motor vehicle title loan business licensed under Chapter 22 (§ 6.2-2200 et seq.), or such other business as the Commission determines should be permitted, and subject to such conditions as the Commission deems necessary and in the public interest. No such other business shall be allowed except as permitted by Commission regulation or upon the filing of a written application with the Commission, payment of a $300 fee or other reasonable amount that the Commission may set, and provision of such information as the Commission may deem pertinent. The Commission shall not, however, permit the sale of insurance or the enrolling of borrowers under group insurance policies. This section shall not apply to any other business that is transacted with persons residing solely outside the Commonwealth.

2002, c. 897, § 6.1-463; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1821. Suspension or revocation of license.

A. The Commission may suspend or revoke any license issued under this chapter upon any of the following grounds:

1. Any ground for denial of a license under this chapter;

2. Any violation of the provisions of this chapter or regulations adopted by the Commission pursuant thereto, or a violation of any other law or regulation applicable to the conduct of the licensee's business;

3. A course of conduct consisting of the failure to perform written agreements with borrowers;

4. Conviction of a felony or misdemeanor involving fraud, misrepresentation or deceit;

5. Entry of a judgment against the licensee involving fraud, misrepresentation or deceit;

6. Entry of a federal or state administrative order against such licensee for violation of any law or any regulation applicable to the conduct of his business;

7. Refusal to permit an investigation or examination by the Commission;

8. Failure to pay any fee or assessment imposed by this chapter; or

9. Failure to comply with any order of the Commission.

B. For the purposes of this section, acts of any officer, director, member, partner, or principal shall be deemed acts of the licensee.

2002, c. 897, § 6.1-464; 2010, c. 794.

§ 6.2-1822. Cease and desist orders.

If the Commission determines that any person has violated any provision of this chapter or any regulation adopted hereunder, the Commission may, upon 21 days' notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of such person or other address authorized under § 12.1-19.1 and shall state the grounds for the contemplated action. Within 14 days of mailing the notice, the person named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not issue a cease and desist order except based upon findings made at such hearing. Such hearing shall be conducted in accordance with the provisions of Title 12.1. The Commission may enforce compliance with any such order issued under this section by imposition and collection of such fines and penalties as may be prescribed by law.

2002, c. 897, § 6.1-465; 2003, c. 593; 2010, c. 794.

§ 6.2-1823. Notice of proposed suspension or revocation.

The Commission shall not revoke or suspend the license of any licensee upon any of the grounds set forth in § 6.2-1821 until it has given the licensee 21 days' notice in writing of the reasons for the proposed revocation or suspension and an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of the licensee or other address authorized under § 12.1-19.1 and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the person named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not suspend or revoke the license except based upon findings made at such hearing. The hearing shall be conducted in accordance with the provisions of Title 12.1.

2002, c. 897, § 6.1-466; 2010, c. 794.

§ 6.2-1824. Civil penalties.

In addition to the authority conferred under §§ 6.2-1821 and 6.2-1822, the Commission may impose a civil penalty not exceeding $1,000 upon any person who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter, the regulations adopted by the Commission pursuant thereto, or any other law or regulation applicable to the conduct of the lender's business. For the purposes of this section, each separate violation shall be subject to the civil penalty herein prescribed, and in the case of a violation of § 6.2-1801, each loan made or arranged shall constitute a separate violation.

2002, c. 897, § 6.1-467; 2003, c. 593; 2008, cc. 849, 876; 2010, c. 794.

§ 6.2-1825. Criminal penalties.

Any person violating § 6.2-1801 is guilty of a Class 6 felony. For the purposes of this section, each violation shall constitute a separate offense.

2002, c. 897, § 6.1-468; 2010, c. 794.

§ 6.2-1826. Validity of noncompliant loan agreement; private right of action.

A. If any provision of a written loan agreement violates this chapter, such provision shall be unenforceable against the borrower.

B. Any person who suffers loss by reason of a violation of any provision of this chapter may bring a civil action to enforce such provision. Any person who is successful in such action shall recover reasonable attorney fees, expert witness fees, and court costs incurred by bringing such action.

2002, c. 897, § 6.1-469; 2008, cc. 849, 876; 2010, c. 794.

§ 6.2-1827. Application of chapter to Internet loans.

A. The provisions of this chapter, including specifically the licensure requirements of § 6.2-1801, shall apply to persons making short-term loans over the Internet to Virginia residents or any individual in the Commonwealth, whether or not the person making the loan maintains a physical presence in the Commonwealth.

B. The Commission may, from time to time, by administrative rule or policy statement, set requirements that the Commission reasonably deems necessary to ensure compliance with this section.

2008, cc. 849, 876, § 6.1-469.1; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1828. Authority of Attorney General; referral by Commission to Attorney General.

A. If the Commission determines that a person is in violation of, or has violated, any provision of this chapter, the Commission may refer the information to the Attorney General and may request that the Attorney General investigate such violations. With or without such referral, the Attorney General is authorized to seek to enjoin violations of this chapter. The circuit court having jurisdiction may enjoin such violations notwithstanding the existence of an adequate remedy at law.

B. The Attorney General may also seek, and the circuit court may order or decree, damages and such other relief allowed by law, including restitution to the extent available to borrowers under applicable law. Persons entitled to any relief as authorized by this section shall be identified by order of the court within 180 days from the date of the order permanently enjoining the unlawful act or practice.

C. In any action brought by the Attorney General by virtue of the authority granted in this provision, the Attorney General shall be entitled to seek reasonable attorney fees and costs.

D. If the Attorney General files an action to enjoin violations of this chapter, the Attorney General shall give notice of such action to the Commission.

2002, c. 897, § 6.1-470; 2010, c. 794; 2020, cc. 1215, 1258.

§ 6.2-1829. Violation of the Virginia Consumer Protection Act.

Any violation of the provisions of this chapter shall constitute a prohibited practice in accordance with § 59.1-200 and shall be subject to any and all of the enforcement provisions of the Virginia Consumer Protection Act (§ 59.1-196 et seq.).

2002, c. 897, § 6.1-471; 2010, c. 794.

Chapter 19 - Money Order Sellers and Money Transmitters

§ 6.2-1900. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Authorized delegate" means a person designated or appointed by a licensee to sell money orders or provide money transmission services on behalf of the licensee.

"Licensee" means a person licensed under this chapter to engage in the business of selling money orders or the business of money transmission, or both.

"Member" means a person who owns or controls a 10 percent or greater interest in a limited liability company.

"Monetary value" means a medium of exchange, whether or not redeemable in money.

"Money order" means a check, traveler's check, draft, or other instrument for the transmission or payment of money or monetary value whether or not negotiable.

"Money order seller" means a person engaged in the business of selling money orders.

"Money transmission" means receiving money or monetary value for transmission by wire, facsimile, electronic means or other means or selling or issuing stored value.

"Money transmitter" means a person engaged in the business of money transmission.

"Nationwide Multistate Licensing System and Registry" or "Registry" means the licensing and registration system operated by the State Regulatory Registry LLC.

"Outstanding" means:

1. With respect to a money order, a money order that has been issued and sold directly by a licensee, or sold by an authorized delegate of the licensee and reported to the licensee, that has not yet been paid by or on behalf of the licensee; or

2. With respect to a money transmission transaction, a money transmission transaction for which the licensee, directly or through an authorized delegate of the licensee, has received money or monetary value from a customer for transmission, but has not yet (i) completed the money transmission transaction by delivering the money or monetary value to the person designated by the customer, or (ii) refunded the money or monetary value to the customer.

"Principal" means any person who, directly or indirectly, owns or controls a 10 percent or greater interest in any form of entity.

"Stored value" means monetary value that is evidenced by an electronic record.

1974, c. 578, § 6.1-370; 1994, c. 889; 1998, c. 10; 2001, c. 372; 2009, c. 346; 2010, c. 794; 2014, c. 454; 2019, c. 634.

§ 6.2-1901. License required; exception.

A. No person shall engage in the business of selling money orders or engage in the business of money transmission, whether or not the person has a location in the Commonwealth, unless the person obtains from the Commission a license issued pursuant to this chapter.

B. No license under this chapter shall be required of any authorized delegate of a licensee.

C. Every person required to be licensed under this chapter shall register with the Registry and be subject to such registration and renewal requirements as may be established by the Registry, in addition to any requirements of this chapter. In adopting regulations pursuant to § 6.2-1913, the Commission shall include any terms, conditions, or requirements applicable to such registration and renewal. Any fees required by the Registry shall be separate and apart from any fees imposed by this chapter. The Commission, at its discretion, may collect any registration and renewal fees on behalf of the Registry and remit such fees to the Registry or permit the Registry to collect any fees imposed by this chapter and remit such fees to the Commission.

D. In connection with its implementation and administration of this chapter, the Commission may establish agreements or contracts with the Registry or other entities designated by the Registry to collect, distribute, and maintain information and records and process fees related to persons required to be licensed under this chapter. In establishing such agreements or contracts, the Commission shall not be subject to the Virginia Public Procurement Act (§ 2.2-4300 et seq.).

1974, c. 578, §§ 6.1-371, 6.1-377; 1983, c. 156; 1987, c. 283; 1990, c. 259; 1994, c. 889; 2001, c. 372; 2005, c. 314; 2009, c. 346; 2010, c. 794; 2019, c. 634.

§ 6.2-1902. Scope and construction of chapter.

A. The provisions of this chapter shall not apply to:

1. The United States, or any department, instrumentality or agency thereof;

2. Any state, or any department, instrumentality, agency, locality, municipality, or political subdivision thereof;

3. Any bank, trust company, savings institution, or credit union operating under the laws of the United States or any state or territory thereof, or other person to the extent the person provides money transmission services as an agent of one or more banks, trust companies, savings institutions, or credit unions operating under the laws of the United States or any state or territory thereof;

4. Any private security services business, licensed under § 9.1-139, that transports or offers to transport money; or

5. Any entity that has been explicitly designated in a written agreement as an agent of any governmental authority or unit identified in subdivision 1 or 2, provided that any funds collected by the agent shall be deemed for all purposes to be received by the governmental authority or unit. This subdivision shall not be construed to prohibit the governmental authority or unit from seeking indemnification from its agent for any direct losses incurred due to the agent's failure to remit funds in accordance with its agreement.

B. This chapter shall be construed by the Commission for the purpose of protecting, against financial loss, residents of the Commonwealth who (i) purchase money orders or (ii) give money or control of their funds or credit into the custody of another person for transmission, regardless of whether the money order seller or money transmitter has any office, facility, authorized delegate, or other physical presence in the Commonwealth.

1974, c. 578, § 6.1-371; 1983, c. 156; 1987, c. 283; 1990, c. 259; 1994, c. 889; 2001, c. 372; 2005, c. 314; 2009, c. 346; 2010, c. 794; 2013, c. 237.

§ 6.2-1903. Application for license; financial statements; application fee.

A. Applications for a license shall be made on forms furnished by the Commissioner and shall set forth the name and address of the applicant, which shall be an entity, a description of the manner in which and the locations at which it proposes to do business, and such additional relevant information as the Commissioner requires. If any material information provided by the applicant changes during the investigation period, the applicant shall immediately notify the Commissioner.

B. The application shall be accompanied by such audited financial statements as the Commissioner may require and an application fee of $1,000. If an application for a license under this chapter is denied, the application fee shall not be refunded. The fee shall not be abated by the expiration, surrender, or revocation of the license.

1974, c. 578, §§ 6.1-372, 6.1-373; 1987, c. 283; 1990, c. 259; 1992, c. 283; 1994, cc. 312, 889; 1996, c. 274; 2001, c. 372; 2009, c. 346; 2010, c. 794; 2014, c. 454.

§ 6.2-1904. Bond required.

A. The application for a license shall be accompanied by a surety bond satisfactory to the Commissioner in the principal amount as determined by the Commissioner. The amount of the bond shall be not less than $25,000 nor more than $1 million. The bond shall be conditioned upon the licensee (i) performing its obligations to purchasers, payees, and holders of money orders and money transmission services sold by the licensee and its authorized delegates and (ii) conducting the licensed business in conformity with this chapter.

B. As an alternative security device and in lieu of the surety bond required by subsection A, a license applicant may deposit with a financial institution designated by such applicant and approved by the Commissioner for that purpose, cash, stocks and bonds, notes, debentures or other obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States, or of the Commonwealth, or of a locality or other political subdivision of the Commonwealth, in an aggregate amount, based upon the principal amount or market value, whichever is lower, of not less than the amounts required by the Commissioner pursuant to subsection A. Such cash or securities shall be deposited and held to secure obligations established in subsection A, but the licensee shall be entitled to (i) receive all interest and dividends thereon and (ii) substitute, with the Commissioner's prior approval, other securities for those deposited. The Commissioner may also direct the licensee, for good cause shown, to substitute other securities for those deposited.

C. The security device required by this section shall remain in place for five years after a licensee ceases money order sales or money transmission activities. The Commissioner may permit the security device to be reduced or eliminated prior to that time to the extent the amount of such licensee's outstanding money orders and money transmission transactions are reduced. The Commissioner may also permit any licensee to substitute a letter of credit, or such other form of security device as may be acceptable to the Commissioner, for the security device in place at the time the licensee ceases money order sales or money transmission activities.

1974, c. 578, § 6.1-372; 1987, c. 283; 1990, c. 259; 1992, c. 283; 1994, c. 889; 1996, c. 274; 2001, c. 372; 2009, c. 346; 2010, c. 794; 2014, c. 454.

§ 6.2-1904.1. Investigation of applications.

A. The Commissioner may make such investigations as he deems necessary to determine if the applicant has complied with all applicable provisions of law and regulations adopted thereunder.

B. For the purpose of investigating individuals who are members, senior officers, directors, and principals of an applicant, such individuals shall comply with one or both of the following, as applicable:

1. In the case of members, senior officers, directors, and principals who have resided in the United States at any time within the previous 10 years, such individuals shall consent to a national and state criminal history records check and submit to fingerprinting. Each member, senior officer, director, and principal shall pay for the cost of such fingerprinting and criminal records check. Such individuals shall cause their fingerprints, personal descriptive information, and records check fees to be submitted to either of the following, as prescribed by the Commissioner:

a. The Bureau, which shall forward these items to the Central Criminal Records Exchange. The Central Criminal Records Exchange shall (i) conduct a search of its own criminal history records and forward such individuals' fingerprints and personal descriptive information to the Federal Bureau of Investigation for the purpose of obtaining national criminal history record information regarding such individuals and (ii) forward the results of the state and national records search to the Commissioner or his designee, who shall be an employee of the Commission; or

b. The Registry, provided that it is capable of processing such criminal history records check.

2. In the case of members, senior officers, directors, and principals who have resided outside of the United States at any time within the previous 10 years, such individuals shall cause an investigative background report to be submitted to the Commissioner. The report shall be prepared by an independent search firm that is acceptable to the Commissioner and be in the English language. Each member, senior officer, director, and principal shall pay for the cost of such report, and the report shall be sent directly by the search firm to the Commissioner or his designee, who shall be an employee of the Commission.

C. If any member, senior officer, director, or principal of an applicant fails to cause his fingerprints, personal descriptive information, records check fees, or investigative background report to be submitted in accordance with subsection B, the application for licensure shall be denied.

2014, c. 454; 2019, c. 634.

§ 6.2-1905. Annual fees; expenses; annual reports; renewal.

A. Each licensee shall pay to the Commission annually on or before December 31 a license renewal fee of $750. All fees paid pursuant to this chapter shall be paid into the state treasury and credited to the "Financial Institutions Special Fund — State Corporation Commission."

B. In order to defray the costs of their examination and supervision, every licensee under this chapter shall pay an annual assessment calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the dollar volume of money orders sold and Virginia money transmission business conducted by licensees, either directly or through their authorized delegates, the costs of their examinations, and to other factors relating to their supervision and regulation. All such fees shall be assessed on or before August 1 for every calendar year. All such fees shall be paid by licensees to the State Treasurer on or before September 1 following each assessment.

C. In addition to the annual assessment prescribed in subsection B, when it becomes necessary to examine or investigate the affairs, business, premises, books, or records of a licensee or any of its authorized delegates at a location outside the Commonwealth, the licensee shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement, the actual travel and reasonable living expenses incurred on account of its examination or investigation, or shall pay a reasonable per diem rate approved by the Commission.

D. Each licensee under this chapter shall file periodic written reports with the Commissioner or the Registry containing such information as the Commissioner may require concerning the licensee's business and operations, including audited financial statements. Reports shall be in the form and be submitted with such frequency and by such dates as may be prescribed by the Commissioner. If a licensee is unable to furnish copies of its audited financial statements by the dates prescribed by the Commissioner, the licensee may request an extension, which may be granted by the Commissioner for good cause shown.

E. If a license has expired or has been surrendered or revoked, the former licensee shall immediately (i) cease selling money orders and engaging in the money transmission business, and (ii) instruct its authorized delegates to cease selling money orders and accepting funds for transmission on behalf of the licensee. The Commission may grant relief from this subsection for good cause shown.

F. A license issued under this chapter shall expire on December 31 of each year unless it is renewed by a licensee prior to the expiration date. A licensee may renew its license by (i) requesting renewal through the Registry; (ii) complying with any requirements associated with such renewal request that are imposed by the Registry; (iii) paying the license renewal fee prescribed in subsection A; (iv) paying the annual assessment prescribed in subsection B; (v) filing the periodic written reports and audited financial statements prescribed in subsection D; and (vi) maintaining the minimum net worth specified in subsection B of § 6.2-1906, as evidenced by its audited financial statements. If the Commissioner finds that the licensee has satisfied these requirements, the Commissioner shall renew such person's license. If a license has expired, the former licensee may seek reinstatement on or before the last day of February of the following calendar year. Upon finding that the former licensee has complied with the renewal requirements set forth in this subsection and remitted payment of a reinstatement fee of $1,000, the Commissioner shall reinstate such person's license.

1974, c. 578, § 6.1-373; 1987, c. 283; 1994, cc. 312, 889; 2001, c. 372; 2009, c. 346; 2010, c. 794; 2014, c. 454; 2019, c. 634.

§ 6.2-1906. Conditions prerequisite to issuance of license; net worth requirement.

A. The Commission shall not issue a license to an applicant unless it determines that:

1. The applicant will be able to and will perform its obligations to purchasers of money transmission services and purchasers, payees, and holders of money orders sold by it and its authorized delegates; and

2. The financial responsibility, character, reputation, experience, and general fitness of the applicant and its members, senior officers, directors, and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with applicable law and regulations.

B. Each licensee shall at all times have a net worth of not less than $200,000, or a higher amount not to exceed $1 million as determined by the Commission, calculated in accordance with generally accepted accounting principles.

1974, c. 578, § 6.1-374; 1990, c. 259; 1994, c. 889; 2001, c. 372; 2009, c. 346; 2010, c. 794; 2014, c. 454.

§ 6.2-1906.1. Licenses; places of business; changes.

A. Each license shall state the address at which the principal place of business is to be conducted and shall state fully the legal name of the licensee as well as any fictitious names by which the licensee is conducting business under this chapter. Licenses shall not be transferable or assignable, by operation of law or otherwise. No licensee shall use any names other than the legal name or fictitious names set forth on the license issued by the Commission.

B. Every licensee shall notify the Commissioner, in writing, at least 30 days prior to relocating its principal place of business and confirm the change in writing within five days after such relocation.

C. Every licensee shall within 10 days notify the Commissioner, in writing, of (i) any change to its legal name, (ii) any change to or additional fictitious name by which the licensee is conducting business under this chapter, and (iii) the name, address, and position of each new member, senior officer, director, or principal. At the direction of the Commissioner, any such individual shall be treated as a member, senior officer, director, or principal of an applicant for the purpose of being investigated pursuant to subsection B of § 6.2-1904.1. The licensee shall provide such other information with respect to the changes and persons identified in this subsection as the Commissioner may reasonably require.

D. Every license shall remain in force until it expires or has been surrendered or revoked. The expiration, surrender, or revocation of a license shall not affect any preexisting legal right or obligation of the licensee.

2014, c. 454.

§ 6.2-1907. License revocation.

A. The Commission may revoke a license issued under this chapter:

1. If it reasonably determines that (i) a licensee is engaging in one or more unsafe or unsound practices, (ii) a licensee may be unable to perform its obligations, or (iii) a licensee has willfully failed without reasonable cause to pay or provide for the payment of any of its obligations; or

2. Upon any of the following grounds:

a. Any ground for denial of a license under this chapter;

b. Any violation of the provisions of this chapter or regulations adopted by the Commission pursuant thereto, or a violation of any other law or regulation applicable to the conduct of the licensee's business;

c. Conviction of a felony or misdemeanor involving fraud, misrepresentation, or deceit;

d. Entry of a judgment against such licensee involving fraud, misrepresentation, or deceit;

e. Entry of a federal or state administrative order against such licensee for violation of any law or any regulation applicable to the conduct of his business;

f. Refusal to permit an investigation or examination by the Commission;

g. Failure to pay any fee or assessment imposed by this chapter; or

h. Failure to comply with any order of the Commission.

B. For the purposes of this section, acts of any officer, director, member, partner, or principal shall be deemed acts of the licensee.

1974, c. 578, § 6.1-374; 1990, c. 259; 1994, c. 889; 2001, c. 372; 2009, c. 346; 2010, c. 794; 2014, c. 454.

§ 6.2-1908. Notice of proposed revocation.

The Commission may not revoke a license issued under this chapter upon any of the grounds set forth in § 6.2-1907 until it has given the licensee 21 days' notice in writing of the reasons for the proposed revocation and has given the licensee an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of such licensee and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not revoke the license except based upon findings made at such hearing.

2009, c. 346, § 6.1-374.1; 2010, c. 794.

§ 6.2-1909. Cease and desist orders.

A. If the Commission determines that (i) any person has violated any provision of this chapter or any regulation adopted hereunder or (ii) a licensee is engaging in one or more unsafe or unsound practices, the Commission may, upon 21 days' notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of such person or other address authorized under § 12.1-19.1 and shall state the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the clerk of the Commission a written request for a hearing. The Commission may enforce compliance with any such order issued under this section by imposition and collection of such fines and penalties as may be prescribed by law.

B. When, in the opinion of the Commission, immediate action is required to protect the public interest, a cease and desist order may be issued immediately without prior hearing. In such cases, the Commission shall make a hearing available to the person on an expedited basis.

C. If required to conserve the assets of a licensee or protect the public interest, the Commission may order a licensee and its authorized delegates to cease and desist from selling additional money orders or receiving additional funds for transmission.

D. The Commission shall have jurisdiction to enter and enforce a cease and desist order against any person, regardless of whether such person is present in the Commonwealth, who directly or indirectly (i) sells money orders to citizens of the Commonwealth or (ii) obtains money or control over such citizens' funds for transmission.

2009, c. 346, § 6.1-374.2; 2010, c. 794.

§ 6.2-1910. Investigations; examinations; reporting violations.

A. The Commission shall have authority to investigate and examine the affairs, business, premises, books, and records of all money order sellers and money transmitters and their authorized delegates. Except as provided herein, the Commission shall make an examination of each licensee at least once in every three-year period and shall adjust the surety bond or alternative security device as it may deem necessary in accordance with § 6.2-1904. The Commission may also examine any authorized delegate of a licensee as often as it is deemed to be in the public interest. Examinations under this section may be conducted in conjunction with examinations to be performed by representatives of agencies of the federal government or another state. The Commission, in lieu of an examination, may accept the examination report of the federal government or another state.

B. Any person designated by the Commission to make investigations or examinations pursuant to this section shall have authority to (i) administer oaths; (ii) examine under oath in the course of such investigations or examinations, the principals, members, owners, officers, directors, partners, and employees of any person required to be licensed by this chapter or such person's authorized delegates; and (iii) compel the production of documents. The principals, members, owners, officers, directors, partners, and employees of any person being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary.

C. The Commission shall report violations of the licensing requirements of § 6.2-1901 to the attorney for the Commonwealth of the city or county in which such violation occurs.

1974, c. 578, § 6.1-375; 1976, c. 531; 1990, c. 259; 1994, c. 889; 2001, c. 372; 2009, c. 346; 2010, c. 794; 2014, c. 454.

§ 6.2-1911. Conduct of business through authorized delegates of licensee.

A. A licensee may conduct its business through or by means of such authorized delegates as the licensee may designate or appoint under a written agreement with such authorized delegates. The agreement between a licensee and an authorized delegate shall (i) require the authorized delegate to comply with the provisions of this chapter and all other applicable state and federal laws and regulations; (ii) require the authorized delegate to remit all sums owing to the licensee in accordance with the terms of the written agreement; (iii) require the authorized delegate to permit the Commission to investigate or examine its business pursuant to § 6.2-1910; and (iv) prohibit the authorized delegate from using a subdelegate, or from otherwise designating or appointing another person to sell money orders or engage in money transmission business on behalf of the licensee.

B. A licensee shall conduct a due diligence review of all new authorized delegates. A licensee shall be responsible for implementing and maintaining a reasonable risk-based supervision program to monitor its authorized delegates.

1974, c. 578, § 6.1-377; 1994, c. 889; 2001, c. 372; 2009, c. 346; 2010, c. 794.

§ 6.2-1912. Liability of licensee for payment of money order; money order to bear name of licensee.

A. A licensee shall be liable for the payment of all funds collected for transmission by the licensee or its authorized delegates and all money orders which it sells, in whatever form and whether directly or through an authorized delegate, as the maker or drawer thereof according to the negotiable instrument laws of the Commonwealth. A licensee who sells a money order, whether directly or through an authorized delegate, upon which he is not designated as maker or drawer shall nevertheless have the same liabilities with respect thereto as if he had signed the money order as the maker or drawer thereof.

B. Every money order sold by a licensee, whether directly or through an authorized delegate, shall bear the name of the licensee clearly imprinted thereon as it appears on its license.

1974, c. 578, § 6.1-378; 2009, c. 346; 2010, c. 794.

§ 6.2-1913. Regulations.

The Commission may adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules.

1990, c. 259, § 6.1-378.1; 1994, c. 889; 2010, c. 794.

§ 6.2-1914. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire directly or indirectly 25 percent or more of the voting shares of a corporation or 25 percent or more of the ownership of any other entity licensed to conduct business under this chapter unless such person first:

1. Files an application with the Commission in such form as the Commission may prescribe from time to time;

2. Delivers such information as the Commission may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, principals, and members, and of any proposed new directors, senior officers, principals, or members of the licensee;

3. Furnishes to the Commissioner information concerning the identity of the directors, senior officers, principals, and members of the applicant, and of any proposed new directors, senior officers, principals, or members of the licensee. For the purpose of investigating these directors, senior officers, principals, and members, such individuals shall comply with one or both of the following, as applicable:

a. In the case of directors, senior officers, principals, and members who have resided in the United States at any time within the previous 10 years, such individuals shall consent to a national and state criminal history records check and submit to fingerprinting. Each director, senior officer, principal, and member shall pay for the cost of such fingerprinting and criminal records check. Such individuals shall cause their fingerprints, personal descriptive information, and records check fees to be submitted to either of the following, as prescribed by the Commissioner:

(1) The Bureau, which shall forward these items to the Central Criminal Records Exchange. The Central Criminal Records Exchange shall (i) conduct a search of its own criminal history records and forward such individuals' fingerprints and personal descriptive information to the Federal Bureau of Investigation for the purpose of obtaining national criminal history record information regarding such individuals, and (ii) forward the results of the state and national records search to the Commissioner or his designee, who shall be an employee of the Commission; or

(2) The Registry, provided that it is capable of processing such criminal history records check.

b. In the case of directors, senior officers, principals, and members who have resided outside of the United States at any time within the previous 10 years, such individuals shall cause an investigative background report to be submitted to the Commissioner. The report shall be prepared by an independent search firm that is acceptable to the Commissioner and be in the English language. Each director, senior officer, principal, and member shall pay for the cost of such report, and the report shall be sent directly by the search firm to the Commissioner or his designee, who shall be an employee of the Commission; and

4. Pays such application fee as the Commission may prescribe.

B. If any material information provided by the applicant changes during the investigation period, the applicant shall immediately notify the Commissioner.

C. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant, its members if applicable, its directors, senior officers, and principals, and any proposed new directors, members, senior officers, and principals have the financial responsibility, character, reputation, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with the applicable laws and regulations. The Commission shall grant or deny the application within 90 days from the date a completed application, accompanied by the required fee, is filed unless the period is extended by the Commission. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

D. The provisions of this section shall not apply to the acquisition of an interest in a licensee directly or indirectly by merger, consolidation, or otherwise, (i) by or with a person licensed under this chapter, (ii) by or with a person affiliated through common ownership with the licensee, or (iii) by bequest, descent, survivorship, or by operation of law. The person acquiring an interest in a licensee in a transaction which is exempt from filing an application by this subsection shall send written notice to the Commission of such acquisition within 30 days after its closing.

E. If any person acquires an ownership interest in a licensee without obtaining prior approval from the Commission as required by this section, the Commission may for good cause shown order such person to divest himself or itself of such ownership interest.

F. The Commission may not enter an order requiring divestiture pursuant to subsection E until it has given the person 21 days' notice in writing of the reasons for the proposed divestiture and has given the person an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to such person and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the person named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not require divestiture except based upon findings made at such hearing.

1998, c. 10, § 6.1-378.2; 2009, c. 346; 2010, c. 794; 2014, c. 454; 2019, c. 634.

§ 6.2-1915. Sale or issuance of bearer money orders; prohibition.

A. No authorized delegate of a licensee shall sell a money order with a face amount of $750 or more that does not designate a specific payee.

B. This section applies only to paper money orders.

C. This section does not apply to (i) travelers checks, (ii) electronic instruments, (iii) stored value products or other similar instruments for the transmission or payment of money, or (iv) money orders sold or issued by insured financial institutions.

D. Licensees shall inform their authorized delegates of the obligations imposed by this section.

1999, c. 355, § 6.1-378.3; 2009, c. 346; 2010, c. 794.

§ 6.2-1916. Retention of books, accounts, and records.

A. Every licensee shall maintain in its principal place of business such books, accounts, and records as the Commission may reasonably require in order to determine whether such licensee is complying with the provisions of this chapter and other laws applicable to the conduct of its licensed business. Such books, accounts, and records shall be maintained apart and separate from any other business in which the licensee is involved.

B. Each licensee shall retain the following records for at least three years:

1. A record of each money transmission transaction and money order sold;

2. A general ledger posted at least monthly containing all asset, liability, capital, income, and expense accounts;

3. Bank statements and bank reconciliation records;

4. Records of outstanding money orders and money transmission transactions;

5. Records of each money order and money transmission transaction paid or completed within the three-year period; and

6. A list of the names, addresses, and telephone numbers of all of the licensee's authorized delegates.

C. Each licensee shall maintain policies and procedures sufficient for it to comply with this chapter and all other laws and regulations applicable to the conduct of its licensed business. A licensee shall furnish copies of its policies and procedures, as amended, to all of its authorized delegates.

2009, c. 346, § 6.1-378.5; 2010, c. 794; 2014, c. 454.

§ 6.2-1917. Other reporting requirements.

A. A licensee or other person shall file a report with the Commissioner within 15 days after the licensee or other person becomes aware of any material changes in information previously provided in an application filed under § 6.2-1903 or 6.2-1914. This requirement shall be applicable only to material changes that occur within one year after the date the licensee begins business or the acquisition is consummated.

B. A licensee shall file with the Commissioner no later than 45 days after the end of each fiscal quarter its quarterly financial statements along with a current list of all authorized delegates and locations where the licensee or an authorized delegate of the licensee sells money orders or receives money for transmission. The licensee shall state the name, street address, and telephone number of each location and authorized delegate.

C. A licensee shall file a report with the Commissioner within one business day after the licensee becomes aware of the occurrence of any of the following events:

1. The filing of a petition by or against the licensee for bankruptcy or reorganization;

2. The filing of a petition by or against the licensee for receivership, the commencement of any other judicial or administrative proceeding for its dissolution or reorganization, or the making of a general assignment for the benefit of its creditors;

3. The commencement of administrative or regulatory proceedings against the licensee by any governmental authority;

4. The cancellation or other impairment of the licensee's bond or other security;

5. Any felony indictment of the licensee or any of its members, partners, directors, officers, principals, or authorized delegates;

6. Any felony conviction of the licensee or any of its members, partners, directors, officers, principals, or authorized delegates; or

7. Such other events as the Commission may prescribe by regulation.

D. Any reports or filings required by this section may be submitted to the Commissioner through the Registry, provided that the Registry is capable of receiving such reports or filings.

2009, c. 346, § 6.1-378.6; 2010, c. 794; 2014, c. 454; 2019, c. 634.

§ 6.2-1918. Maintenance of permissible investments.

A. A licensee shall maintain at all times permissible investments that have a market value computed in accordance with generally accepted accounting principles of not less than the aggregate dollar amount of all of its (i) outstanding money orders from all states and (ii) outstanding money transmission transactions from all states. For purposes of this subsection, a licensee may calculate the aggregate dollar amount of its outstanding stored value products in accordance with generally accepted accounting principles.

B. The Commission, with respect to any licensees, may limit the extent to which a type of investment within a class of permissible investments may be considered a permissible investment, except for money and certificates of deposit issued by a bank. The Commission may prescribe by regulation other types of investments that the Commission determines to have a safety substantially equivalent to other permissible investments.

C. Permissible investments shall be deemed to be held in trust for the benefit of the purchasers and holders of the licensee's outstanding money orders and money transmission services in the event of bankruptcy or receivership of the licensee.

2009, c. 346, § 6.1-378.7; 2010, c. 794; 2017, c. 654.

§ 6.2-1919. Types of permissible investments.

A. Except to the extent otherwise limited by the Commission pursuant to § 6.2-1918, the following investments are permissible under § 6.2-1918:

1. Cash, a certificate of deposit, or senior debt obligation of an insured depository institution, as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. § 1813).

2. A banker's acceptance or bill of exchange that is eligible for purchase upon endorsement by a member bank of the Federal Reserve System and is eligible for purchase by a Federal Reserve Bank.

3. An investment bearing a rating of one of the three highest grades, as defined by a nationally recognized organization that rates securities.

4. An investment security that is an obligation of the United States or a department, agency, or instrumentality thereof; an investment in an obligation that is guaranteed fully as to principal and interest by the United States; or an investment in an obligation of a state or a governmental subdivision, agency, or instrumentality thereof.

5. Receivables that are payable to a licensee from its authorized delegates, pursuant to contracts and in the ordinary course of business, that are not past due or doubtful of collection. A receivable shall be deemed to be past due or doubtful of collection if the money owed to the licensee is not remitted within seven business days. However, the aggregate amount of receivables under this subdivision from any one person shall not comprise more than 10 percent of the licensee's total permissible investments.

6. A share or a certificate issued by an open-end management investment company that is registered with the U.S. Securities and Exchange Commission under the Investment Companies Act of 1940 (15 U.S.C. § 80a-1 et seq.), and whose portfolio is restricted by the management company's investment policy to investments specified in subdivisions 1 through 4.

B. The following investments are permissible under § 6.2-1918, but only to the extent specified:

1. An interest-bearing bill, note, bond, or debenture of a person whose equity shares are traded on a national securities exchange or on a national over-the-counter market, if the aggregate of investments under this subdivision does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time hold investments under this subdivision in any one person aggregating more than 10 percent of the licensee's total permissible investments;

2. A share of a person traded on a national securities exchange or a national over-the-counter market or a share or a certificate issued by an open-end management investment company that is registered with the U.S. Securities and Exchange Commission under the Investment Companies Act of 1940 (15 U.S.C. § 80a-1 et seq.), and whose portfolio is restricted by the management company's investment policy to shares of a person traded on a national securities exchange or a national over-the-counter market, if the aggregate of investments under this subdivision does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time hold investments in any one person aggregating more than 10 percent of the licensee's total permissible investments;

3. A demand-borrowing agreement made to a corporation or a subsidiary of a corporation whose securities are traded on a national securities exchange if the aggregate of the amount of principal and interest outstanding under demand-borrowing agreements under this subdivision does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time hold principal and interest outstanding under demand-borrowing agreements under this subdivision with any one person aggregating more than 10 percent of the licensee's total permissible investments; and

4. Any other investment the Commission designates, to the extent specified by the Commission.

C. The aggregate of investments under subsection B may not exceed 50 percent of the total permissible investments of a licensee calculated in accordance with § 6.2-1918.

2009, c. 346, § 6.1-378.8; 2010, c. 794; 2014, c. 454.

§ 6.2-1920. Civil penalties.

In addition to the authority conferred under §§ 6.2-1907 and 6.2-1909, the Commission may impose a civil penalty not exceeding $2,500 upon any person licensed or required to be licensed under this chapter who the Commission determines has violated any of the provisions of this chapter or any other law or regulation applicable to the conduct of the person's business. For the purposes of this section, each separate violation shall be subject to the civil penalty herein prescribed. In the case of a violation of § 6.2-1901, each money order sale or money transmission transaction shall constitute a separate violation.

2001, c. 372, § 6.1-378.4; 2009, c. 346; 2010, c. 794.

§ 6.2-1921. Criminal penalty.

Any person required by this chapter to have a license who sells money orders or engages in the business of money transmission without first being licensed as required by § 6.2-1901 is guilty of a Class 1 misdemeanor.

1974, c. 578, § 6.1-375; 1976, c. 531; 1990, c. 259; 1994, c. 889; 2001, c. 372; 2009, c. 346, 2010, c. 794.

Chapter 20 - AGENCIES PROVIDING DEBT MANAGEMENT PLANS

§ 6.2-2000. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Agency" means any person that provides or offers to provide debt management plans for consumers.

"Consumer" means an individual residing in the Commonwealth who owes money to one or more creditors, for personal, family, or household purposes, including an individual who owes money jointly with one or more other individuals.

"Credit counselor" means an employee or agent of an agency who designs a debt management plan, provides consumer budget and basic financial planning services, or engages in debt settlement or debt pooling and distribution services on a consumer's behalf. "Credit counselor" does not include licensed certified public accountants or licensed certified public accounting firms engaging in usual and customary services performed on behalf of clients.

"Creditor" or "credit-granting organization" does not include (i) doctors, lawyers, or other professionals who receive payment for their services in installments or (ii) persons whose only participation in a credit transaction is to honor a credit card.

"Debt collector" means a person defined as a debt collector under 15 U.S.C. § 1692a of the federal Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.).

"Debt management plan" or "DMP" means a program whereby a person agrees to engage in debt pooling and distribution services on behalf of a consumer, or multiple consumers if a joint account.

"Debt pooling and distribution service" means an arrangement whereby a consumer gives money or control of his funds to a person for distribution to the consumer's creditors.

"Debt settlement" means any action or negotiation initiated or taken by or on behalf of any consumer with any creditor of the consumer for the purpose of obtaining debt forgiveness of a portion of the credit extended by the creditor to the consumer or reduction of payments, charges, or fees payable by the consumer.

"Duplicate original" means an exact copy with signatures created by the same impression as the original, or an exact copy bearing an original signature, or in the case of an electronic transaction, an electronic version with electronic signatures.

"Electronic signature" means a signature as defined in § 59.1-480.

"Licensee" means a person licensed under this chapter.

"Maintenance fee" means a fee paid by a consumer to an agency for the administration of a DMP.

"Principal" means any person who, directly or indirectly, owns or controls (i) 10 percent or more of the outstanding stock of a stock corporation or (ii) a 10 percent or greater interest in a person.

"Set-up fee" means a fee paid by a consumer to an agency for the establishment of a DMP.

2004, c. 790, §§ 6.1-363.2, 6.1-363.7; 2005, c. 315; 2010, c. 794; 2011, c. 307.

§ 6.2-2001. License requirement; exceptions.

A. No person shall engage in the business of providing or offering to provide a DMP to any consumer, whether or not the person has an office, facility, agent, or other physical presence in the Commonwealth, unless such person obtains from the Commission a license issued pursuant to this chapter. The provisions of this chapter shall not apply to any bank, savings institution, or credit union, or to a person licensed to practice law in the Commonwealth.

B. This chapter shall be construed by the Commission to promote sound personal financial advice and management, and protect against financial loss consumers who place money or control of their funds or credit into the custody of an agency for transmission to such consumers' creditors.

C. A person licensed under this chapter is not required to be licensed as a money transmitter under Chapter 19 (§ 6.2-1900 et seq.), if the person's money transmission activities are limited to providing debt pooling and distribution services in accordance with this chapter.

2004, c. 790, § 6.1-363.3; 2010, c. 794; 2019, c. 325.

§ 6.2-2002. Application for license; form; content; fee.

A. An application for a license under this chapter shall be made in writing, under oath, and on a form provided by the Commissioner.

B. The application shall include:

1. The name and address of the applicant; and (i) if the applicant is a partnership, firm, or association, the name and address of each partner or member; (ii) if the applicant is a corporation or limited liability company, the name and address of each director, member, registered agent, and principal; or (iii) if the applicant is a business trust, the name and address of each trustee and beneficiary;

2. The name and address of each manager and officer;

3. The addresses of the locations of the business to be licensed;

4. Financial statements for the applicant as of the most recent fiscal year;

5. A current copy of the agency's standard DMP agreement;

6. Such other information concerning the financial responsibility, background, experience, and activities of the applicant and the persons referred to in this section as the Commissioner may require;

7. Any other pertinent information as the Commissioner may require; and

8. Payment of an application fee of $500.

C. The application fee shall not be refundable in any event. The fee shall not be abated by surrender, suspension, or revocation of the license.

2004, c. 790, § 6.1-363.4; 2005, c. 315; 2010, c. 794.

§ 6.2-2003. Bond required.

The application for a license shall be accompanied by a bond filed with the Commissioner with corporate surety authorized to execute the bond in the Commonwealth, in the principal amount as determined by the Commission. The amount of the bond shall be not less than $25,000 nor more than $350,000. The form of the bond shall be approved by the Commission. The bond shall be continuously maintained thereafter in full force, and the Commission may require the principal amount to be adjusted as it deems necessary. The bond shall be conditioned upon the licensee performing all written agreements with consumers, correctly and accurately accounting for all funds received by the licensee in the licensed business, and conducting the licensed business in conformity with this chapter and all applicable law. Any person who may be damaged by noncompliance of the licensee with any condition of the bond may proceed on the bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

2004, c. 790, § 6.1-363.5; 2010, c. 794.

§ 6.2-2004. Investigation of applications.

The Commissioner may make such investigations as he deems necessary to determine if the applicant has complied with all applicable provisions of law and regulations adopted thereunder.

2004, c. 790, § 6.1-363.6; 2010, c. 794.

§ 6.2-2005. Qualifications.

A. Upon the filing and investigation of an application for a license, and compliance by the applicant with the provisions of §§ 6.2-2002 and 6.2-2003, the Commission shall issue and deliver to the applicant the license to engage in business under this chapter at the locations specified in the application if it finds that:

1. The financial responsibility, character, reputation, experience, and general fitness of the applicant and its members, senior officers, directors, trustees, and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law;

2. The applicant has made acceptable provision for the avoidance of conflicts of interest;

3. The applicant maintains a separate trust account with an FDIC-insured depository institution for the handling of customers' funds;

4. The applicant's credit counselors are certified through a bona fide third-party certification provider unaffiliated with the applicant that authenticates the competence of counselors providing consumer assistance;

5. No more than one-third of the board of directors or managing members are employees, officers, members, principals, trustees, directors, agents, or other representatives of organizations that grant credit to consumers;

6. The applicant is accredited by the International Standards Organization or the Council on Accreditation or any other organization approved by the Commission;

7. The applicant has fidelity bond coverage in such principal amount as may be determined by the Commission;

8. The applicant (i) is not the subject of any current material administrative or regulatory proceedings by any governmental authority and (ii) has not received a material adverse determination in any past administrative or regulatory proceedings by any governmental authority; and

9. The applicant has filed with the Commission a form, that shall be provided to each consumer prior to his execution of a DMP, that contains the following disclosures to the consumer: (i) all fees charged by the applicant or contributions solicited by the applicant from the consumer; (ii) whether the applicant is a for-profit entity or nonprofit entity; and (iii) whether the applicant received financial support from creditors during the preceding calendar year.

B. If the Commission fails to make such findings, no license shall be issued and the Commissioner shall notify the applicant of the denial and the reasons for such denial.

C. A license shall not be issued to a collection agency, or to any creditor or association of creditors, or to any credit-granting organization or association of such organizations.

2004, c. 790, § 6.1-363.7; 2005, c. 315; 2010, c. 794.

§ 6.2-2006. Licenses; places of business; changes.

A. Each license shall state the address or addresses at which the business is to be conducted and shall state fully the legal name of the licensee as well as any fictitious name by which the licensee is operating in the Commonwealth. Each license shall be posted prominently in each place of business of the licensee. Licenses shall not be transferable or assignable, by operation of law or otherwise. No licensee shall use any name in the Commonwealth other than the legal name or fictitious name set forth on the license issued by the Commission.

B. No licensee shall open an additional office or relocate any place of business without prior approval of the Commission. Applications for such approval shall be made in writing on a form provided by the Commissioner and shall be accompanied by payment of a $150 nonrefundable application fee. The application shall be approved unless the Commission finds that the applicant has not conducted business under this chapter efficiently, fairly, in the public interest, and in accordance with law. The application shall be deemed approved if notice to the contrary has not been mailed by the Commission to the applicant within 30 days of the date the application is received by the Commission, but this period may be extended for good cause. After approval, the applicant shall give written notice to the Commissioner within 20 days of the commencement of business at the additional location or relocated place of business.

C. Every licensee shall within 20 days notify the Commissioner, in writing, of the closing of any business location and of the name, address, and position of each new senior officer, member, partner, or director and provide such other information with respect to any such change as the Commissioner may reasonably require.

D. Every license shall remain in force until it has been surrendered, revoked, or suspended. The surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of such licensee.

2004, c. 790, § 6.1-363.8; 2010, c. 794.

§ 6.2-2007. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire, directly or indirectly, 25 percent or more of the voting shares of a corporation, or 25 percent or more of the ownership of any other person, licensed to conduct business under this chapter unless such person first:

1. Files an application with the Commission in such form as the Commissioner may prescribe from time to time;

2. Delivers such other information to the Commissioner as the Commissioner may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, trustees, beneficiaries, principals, and members, and of any proposed new directors, senior officers, principals, or members of the licensee; and

3. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant, its members if applicable, its directors, senior officers, members, trustees, beneficiaries, and principals, and any proposed new persons having any such status have the financial responsibility, character, reputation, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by order of the Commissioner reciting the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

C. The provisions of this section shall not apply to (i) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person licensed by this chapter, (ii) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person affiliated through common ownership with the licensee, or (iii) the acquisition of an interest in a licensee by a person by bequest, descent, survivorship, or operation of law. The person acquiring an interest in a licensee in a transaction that is exempt from filing an application by this subsection shall send written notice to the Commissioner of such acquisition within 30 days of its closing.

2004, c. 790, § 6.1-363.9; 2010, c. 794.

§ 6.2-2008. Retention of books, accounts, and records; responding to Bureau.

A. Every licensee shall maintain in its licensed offices such books, accounts, and records as the Commission may reasonably require in order to determine whether the licensee is complying with the provisions of this chapter and regulations adopted thereunder. Such books, accounts, and records shall be maintained apart and separate from any other business in which the licensee is involved. Such records relating to DMPs shall be retained for at least three years after the DMPs are terminated. To safeguard the privacy of consumers, records containing personal financial information shall be shredded, incinerated, or otherwise disposed of in a secure manner. Licensees may arrange for the shredding, incineration, or other disposal of the records from a business record destruction vendor.

B. When the Bureau requests a written response, books, records, documentation, or other information from a licensee in connection with the Bureau's investigation, enforcement, or examination of compliance with applicable laws, the licensee shall deliver a written response as well as any requested books, records, documentation, or information within the time period specified in the Bureau's request. If no time period is specified, a written response as well as any requested books, records, documentation, or information shall be delivered by the licensee to the Bureau not later than 30 days from the date of such request. In determining the specified time period for responding to the Bureau and when considering a request for an extension of time to respond, the Bureau shall take into consideration the volume and complexity of the requested written response, books, records, documentation, or information and such other factors as the Bureau determines to be relevant under the circumstances.

2004, c. 790, § 6.1-363.10; 2010, c. 794.

§ 6.2-2009. Annual report.

Each licensee under this chapter shall annually, on or before March 25, file a written report with the Commissioner containing such information as the Commissioner may require concerning his business and operations during the preceding calendar year as to each licensed place of business. Reports shall be made under oath and shall be in the form prescribed by the Commissioner.

2004, c. 790, § 6.1-363.11; 2010, c. 794.

§ 6.2-2010. Other reporting requirements.

A. Within 15 days following the occurrence of any of the following events, a licensee shall file a written report with the Commission describing such event and its expected impact upon the business of the licensee:

1. The filing of bankruptcy, reorganization, or receivership proceedings by or against the licensee;

2. The institution of administrative or regulatory proceedings against the licensee by any governmental authority;

3. Any felony indictments of the licensee or any of its members, partners, directors, officers, trustees, beneficiaries, or principals, if known;

4. Any felony conviction of the licensee or any of its members, partners, directors, officers, trustees, beneficiaries, or principals, if known;

5. The institution of an action against the licensee under the Virginia Consumer Protection Act (§ 59.1-196 et seq.) by the Attorney General or any other governmental authority; or

6. Such other event as the Commission may prescribe by regulation.

B. Within 30 days of judgment against the licensee in a civil action relating to the DMP of a consumer, a licensee shall file a written report with the Commission describing such event and its expected impact upon the business of the licensee. The licensee shall advise the Commission within 30 days of any settlement or the result of any judgment entered.

C. Within 10 days of receipt of any qualified audit, a licensee shall notify the Commission and describe what steps are being taken to address concerns raised in the audit.

D. Failure to file a report or other information or documents required under this section shall subject the licensee to a fine of $25 for each day the report is overdue.

2004, c. 790, § 6.1-363.12; 2010, c. 794.

§ 6.2-2011. Investigations; examinations.

The Commission may, by its designated officers and employees, as often as it deems necessary, investigate and examine the affairs, business, premises, and records of any person licensed or required to be licensed under this chapter insofar as they pertain to any business for which a license is required by this chapter. Examinations of licensees shall be conducted at least once in each three-year period. In the course of such investigations and examinations, the owners, members, officers, directors, partners, trustees, beneficiaries, and employees of such person being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary. For the foregoing purposes, the person making such investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

2004, c. 790, § 6.1-363.13; 2010, c. 794.

§ 6.2-2012. Annual fees.

A. To defray the costs of the examination, supervision, and regulation of licensees, every licensee under this chapter shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the total number of DMPs maintained by licensees in the Commonwealth, the actual costs of their examinations, and to other factors relating to their supervision and regulation. All such fees shall be assessed on or before June 1 for every calendar year. All such fees shall be paid by the licensee to the State Treasurer on or before July 1 following each assessment.

B. In addition to the annual fee prescribed in subsection A, when it becomes necessary to examine or investigate the books and records of a licensee under this chapter at a location outside the Commonwealth, the licensee shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement, the actual travel and reasonable living expenses incurred on account of its examination, supervision, and regulation, or shall pay at a reasonable per diem rate approved by the Commission.

2004, c. 790, § 6.1-363.14; 2008, c. 508; 2010, c. 794.

§ 6.2-2013. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules.

2004, c. 790, § 6.1-363.15; 2010, c. 794.

§ 6.2-2014. Required and prohibited business methods.

Each licensee shall comply with the following requirements:

1. Each DMP shall be evidenced by an agreement, which shall be maintained in either a hard copy, including a faxed copy, or electronic version and which shall be signed by the consumer and a person authorized by the licensee to sign such agreements and dated the same day the DMP is executed by the consumer. The agreement may be signed by the parties either originally or by electronic signature. The agreement shall set forth, at a minimum: (i) the name and address of both the consumer and the licensee; (ii) a full description of all services to be performed for the consumer by the licensee; (iii) a clear explanation, highlighted in bold type, of the costs to the consumer; (iv) a statement that the DMP agreement can be terminated for any reason by the consumer and that the consumer has no obligation to continue the arrangement unless satisfied with the services provided; (v) a statement that in the event of termination of the agreement, the consumer shall be entitled to a refund of all funds that have not been disbursed to creditors and either (a) all fees paid if terminated within five days of the date the DMP agreement is executed by the consumer or (b) all fees paid less the set-up fee if terminated more than five but less than 31 days after execution by the consumer; (vi) an explanation of the method of dispute resolution under the agreement; (vii) an explanation of the obligations of the consumer and the licensee that are subject to the agreement; (viii) notification of privacy policies in compliance with state and federal laws and regulations; and (ix) a statement that participating in a DMP may have a derogatory effect upon the consumer's credit report;

2. A licensee shall give to the consumer a duplicate original of the agreement executed by the consumer and licensee upon full execution;

3. At the time of execution of the DMP, a licensee shall have a good faith belief that the creditors listed in the DMP will participate in the DMP. A licensee shall advise the consumer of any changes by a creditor in accepting payments under the DMP promptly upon learning of such changes;

4. A licensee shall provide a consumer enrolled in a DMP with periodic statements, no less often than quarterly, accounting for the funds received from the consumer for payments to the consumer's creditors and disbursements made to each such creditor on the consumer's behalf since the last report;

5. A licensee shall not purchase any debt or obligation of a consumer;

6. A licensee shall not lend money or provide credit to any consumer;

7. A licensee shall not obtain a mortgage or any other security interest in the property of a consumer;

8. A licensee shall not operate as a debt collector;

9. A licensee shall not structure an agreement for the consumer that, at the conclusion of the DMP, would knowingly result in negative amortization of any of the consumer's obligations to creditors;

10. A licensee shall not give legal advice to a consumer or perform legal services on behalf of a consumer;

11. A licensee shall have an established practice of disbursing to creditors funds received from a consumer under a DMP within eight business days of receipt and shall provide consumers its disbursement practices in writing, including any circumstances that would establish an exception to the eight-day practice;

12. A licensee shall maintain appropriate safeguards against conflicts of interest in the conduct of its DMP activities;

13. A licensee shall not employ any person who is employed at the same time by a creditor or collection agency;

14. A licensee shall keep (i) its operating funds separate from the funds entrusted to the licensee by consumers for disbursement to creditors and (ii) consumers' funds in a trust account, held in the name of the licensee by an insured depository institution;

15. A licensee shall upon request give a consumer signed, dated receipts for funds received from a consumer under a DMP, or provide a means whereby the consumer may view the status of his account electronically; and

16. A licensee shall not obtain any agreement from a consumer (i) giving the licensee or any third person power of attorney or authority to confess judgment for the consumer; (ii) authorizing the licensee or any third party to bring suit against the consumer in a court outside the Commonwealth; or (iii) waiving any right the consumer has under this chapter.

2004, c. 790, § 6.1-363.16; 2010, c. 794.

§ 6.2-2015. Fees and contributions.

For establishing and maintaining a DMP, a licensee may charge or receive fees or contributions in an amount not to exceed the following: (i) $75 for a set-up fee; and (ii) a monthly maintenance fee of 15 percent of the total amount disbursed, but in no event more than $60 per month.

2004, c. 790, § 6.1-363.17; 2010, c. 794.

§ 6.2-2016. Additional charges.

In addition to the fees and contributions permitted under § 6.2-2015, no further or other amount whatsoever shall be directly or indirectly charged, contracted for, collected, received, or recovered with respect to a DMP except, with the consumer's advance permission after disclosure of such amounts, reimbursement for (i) the actual cost of obtaining for such consumer one credit report and related credit report information from a credit reporting agency; and (ii) the actual bank charges for automatic account debiting for debt repayment.

2004, c. 790, § 6.1-363.18; 2010, c. 794.

§ 6.2-2017. Advertising.

No person licensed or required to be licensed under this chapter shall use or cause to be published any advertisement that (i) contains any false, misleading, or deceptive statement or representation; or (ii) identifies the person by any name other than the name set forth on the license issued by the Commission.

2004, c. 790, § 6.1-363.19; 2010, c. 794.

§ 6.2-2018. Suspension or revocation of license.

A. The Commission may suspend or revoke any license issued under this chapter upon any of the following grounds:

1. Any ground for denial of a license under this chapter;

2. Any violation of the provisions of this chapter or regulations adopted by the Commission thereunder, or a violation of any other law or regulation applicable to the conduct of the licensee's business;

3. A course of conduct consisting of the failure to perform written agreements with consumers;

4. Conviction of a felony or misdemeanor involving fraud, misrepresentation, or deceit;

5. Entry of a judgment against the licensee involving fraud, misrepresentation, or deceit;

6. Entry of a federal or state administrative order against such licensee for violation of any law or any regulation applicable to the conduct of his business;

7. Refusal to permit an investigation or examination by the Commission;

8. Failure to pay any fee or assessment imposed by this chapter;

9. Failure to comply with any order of the Commission; or

10. Insolvency of the licensee.

B. For the purposes of this section, acts of any officer, director, member, trustee, beneficiary, partner, or principal shall be deemed acts of the licensee.

2004, c. 790, § 6.1-363.20; 2010, c. 794.

§ 6.2-2019. Cease and desist orders.

A. If the Commission determines that any person has violated any provision of this chapter or any regulation adopted hereunder, the Commission may, upon 21 days' notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of such person or other address authorized under § 12.1-19.1 and shall state the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not issue a cease and desist order except based upon findings made at such hearing. Such hearing shall be conducted in accordance with the Commission's Rules. The Commission may enforce compliance with any order issued under this section by imposition and collection of such fines and penalties as may be prescribed by law.

B. When, in the opinion of the Commission, immediate action is required to protect the public interest, a cease and desist order may be issued without prior hearing. In such cases, the Commission shall make a hearing available to the person on an expedited basis.

C. The Commission shall have jurisdiction to enter and enforce a cease and desist order against any person, regardless of whether such person is present in the Commonwealth, who obtains money or funds from a consumer for transmission to the consumer's creditors.

2004, c. 790, § 6.1-363.21; 2010, c. 794.

§ 6.2-2020. Notice of proposed suspension or revocation.

The Commission shall not revoke or suspend the license of any person licensed under this chapter upon any of the grounds set forth in § 6.2-2018 until it has given the licensee 21 days' notice in writing of the reasons for the proposed revocation or suspension and an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of the licensee or other address authorized under § 12.1-19.1 and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not suspend or revoke the license except based upon findings made at such hearing. The hearing shall be conducted in accordance with the Commission's Rules.

2004, c. 790, § 6.1-363.22; 2010, c. 794.

§ 6.2-2021. Civil penalties.

A. In addition to the authority conferred under §§ 6.2-2018 and 6.2-2019, the Commission may impose a civil penalty not exceeding $1,000 upon any person who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter. For the purposes of this section, each separate violation shall be subject to the civil penalty herein prescribed. In the case of a violation of § 6.2-2001, each DMP entered into shall constitute a separate violation.

B. The Commission shall have jurisdiction to impose civil penalties upon any person, regardless of whether such person is present in the Commonwealth, who obtains money or funds from a consumer for transmission to the consumer's creditors.

2004, c. 790, § 6.1-363.23; 2010, c. 794.

§ 6.2-2022. Criminal penalty.

Any person violating subsection A of § 6.2-2001 is guilty of a Class 1 misdemeanor. For purposes of this section, each violation shall constitute a separate offense.

2004, c. 790, § 6.1-363.3; 2010, c. 794.

§ 6.2-2023. Private right of action.

Any person who suffers loss by reason of a violation of any provision of this chapter may bring a civil action to enforce such provision. Any person who is successful in such action shall recover reasonable attorney fees, expert witness fees, and court costs incurred by bringing such action.

2004, c. 790, § 6.1-363.24; 2010, c. 794.

§ 6.2-2024. Authority of Attorney General; referral by Commission to Attorney General.

A. If the Commission determines that a person is in violation, or has violated, any provision of this chapter, the Commission may refer the information to the Attorney General and may request that the Attorney General investigate such violations. In the case of such referral, the Attorney General is hereby authorized to seek to enjoin violations of this chapter. The circuit court having jurisdiction may enjoin such violations notwithstanding the existence of an adequate remedy at law.

B. Upon such referral by the Commission, the Attorney General may also seek, and the circuit court may order or decree, damages and such other relief allowed by law, including restitution to the extent available to borrowers under applicable law. Persons entitled to any relief as authorized by this section shall be identified by order of the court within 180 days from the date of the order permanently enjoining the unlawful act or practice.

C. In any action brought by the Attorney General by virtue of the authority granted in this provision, the Attorney General shall be entitled to seek reasonable attorney fees and costs.

2004, c. 790, § 6.1-363.25; 2010, c. 794.

§ 6.2-2025. Violation of the Virginia Consumer Protection Act.

Any violation of the provisions of this chapter shall constitute a prohibited practice in accordance with § 59.1-200 and shall be subject to any and all of the enforcement provisions of the Virginia Consumer Protection Act (§ 59.1-196 et seq.).

2004, c. 790, § 6.1-363.26; 2010, c. 794.

Chapter 20.1 - Debt Settlement Services Providers

§ 6.2-2026. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Consumer" means an individual residing in the Commonwealth who owes money to one or more creditors, for personal, family, or household purposes, including an individual who owes money jointly with one or more other individuals.

"Credit counselor" means an employee or agent of a licensee who engages in debt settlement services on a consumer's behalf.

"Creditor" includes persons that extend credit to, or persons that service loans made to, consumers. "Creditor" or "credit-granting organization" does not include (i) doctors, lawyers, or other professionals who receive payment for their services in installments or (ii) persons whose only participation in a credit transaction is to honor a credit card.

"Debt collector" means a person defined as a debt collector under 15 U.S.C. § 1692a of the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.

"Debt settlement services" means any action or negotiation initiated or taken on behalf of any consumer with any creditor of the consumer for the purpose of obtaining debt forgiveness of all or a portion of the credit extended by the creditor to the consumer or a reduction of payments, charges, or fees payable by the consumer. For purposes of this chapter, with respect to student loan forgiveness or student loan payment reduction programs established under federal or state law and widely available to similarly situated consumers at no cost, the facilitation of enrollment in or qualification for such programs does not constitute an action or negotiation.

"Duplicate original" means an exact copy with signatures created by the same impression as the original, an exact copy bearing an original signature, or, in the case of an electronic transaction, an electronic version with electronic signatures.

"Electronic signature" means an electronic signature as defined in § 59.1-480.

"Licensee" means a person licensed under this chapter.

"Principal" means any person that, directly or indirectly, owns or controls (i) 10 percent or more of the outstanding stock of a stock corporation or (ii) a 10 percent or greater interest in a person.

2020, c. 785.

§ 6.2-2027. License requirement; exceptions.

A. No person shall engage in the business of providing or offering to provide debt settlement services to any consumer, whether or not the person has an office, facility, agent, or other physical presence in the Commonwealth, unless such person obtains from the Commission a license issued pursuant to this chapter. The provisions of this chapter shall not apply to any bank, savings institution, or credit union or any person licensed to practice law in the Commonwealth.

B. This chapter shall be construed by the Commission to promote sound personal financial advice and management.

C. A person licensed under Chapter 20 (§ 6.2-2000 et seq.) is not required to be licensed under this chapter if it offers to provide or provides debt settlement services solely in connection with offering to provide or providing debt management plans.

D. A person licensed under this chapter shall not receive money from consumers for transmission to consumers' creditors or engage in the business of providing or offering to provide debt management plans to consumers unless such person is also licensed under Chapter 20 (§ 6.2-2000 et seq.).

2020, c. 785.

§ 6.2-2028. Application for license; form; content; fee.

A. An application for a license under this chapter shall be made in writing, under oath, and on a form provided by the Commissioner.

B. The application shall include:

1. The name and address of the applicant and (i) if the applicant is a partnership, firm, or association, the name and address of each partner or member; (ii) if the applicant is a corporation or limited liability company, the name and address of each director, member, registered agent, and principal; or (iii) if the applicant is a business trust, the name and address of each trustee and beneficiary;

2. The name and address of each manager and officer;

3. The addresses of the locations of the business to be licensed;

4. Financial statements for the applicant;

5. A current copy of the applicant's standard debt settlement services agreement;

6. Such other information concerning the financial responsibility, background, experience, and activities of the applicant and the persons referred to in this section as the Commissioner may require;

7. Any other pertinent information as the Commissioner may require; and

8. Payment of an application fee of $500.

C. The application fee shall not be refundable in any event. The fee shall not be abated by surrender, suspension, or revocation of the license.

2020, c. 785.

§ 6.2-2029. Bond required.

The application for a license shall be accompanied by a bond filed with the Commissioner with corporate surety authorized to execute the bond in the Commonwealth, in the principal amount as determined by the Commission. The amount of the bond shall be not less than $25,000 nor more than $350,000. The form of the bond shall be approved by the Commission. The bond shall be continuously maintained thereafter in full force, and the Commission may require the principal amount to be adjusted as it deems necessary. The bond shall be conditioned upon the licensee performing all written agreements with consumers and conducting the licensed business in conformity with this chapter and all applicable law. Any person who may be damaged by noncompliance of the licensee with any condition of the bond may proceed on the bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

2020, c. 785.

§ 6.2-2030. Investigation of applications.

The Commissioner may make such investigations as he deems necessary to determine if the applicant has complied with all applicable provisions of law and regulations adopted thereunder.

2020, c. 785.

§ 6.2-2031. Qualifications.

A. Upon the filing and investigation of an application for a license, and compliance by the applicant with the provisions of §§ 6.2-2028 and 6.2-2029, the Commission shall issue and deliver to the applicant the license to engage in business under this chapter at the locations specified in the application if it finds that:

1. The financial responsibility, character, reputation, experience, and general fitness of the applicant and its members, senior officers, directors, trustees, and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law;

2. The applicant has made acceptable provision for the avoidance of conflicts of interest;

3. The applicant's credit counselors are certified through a bona fide third-party certification provider unaffiliated with the applicant that authenticates the competence of counselors providing consumer assistance;

4. No more than one-third of the board of directors or managing members are employees, officers, members, principals, trustees, directors, agents, or other representatives of organizations that grant credit to consumers;

5. The applicant has fidelity bond coverage in such principal amount as may be determined by the Commission; and

6. The applicant (i) is not the subject of any current material administrative or regulatory proceedings by any governmental authority and (ii) has not received a material adverse determination in any past administrative or regulatory proceedings by any governmental authority.

B. For purposes of subdivision A 6, the Commission shall have sole discretion to determine the materiality of any proceedings or determinations.

C. If the Commission fails to make such findings, no license shall be issued and the Commissioner shall notify the applicant of the denial and the reasons for such denial.

D. A license shall not be issued to a collection agency, or to any creditor or association of creditors, or to any credit-granting organization or association of such organizations.

2020, c. 785.

§ 6.2-2032. Licenses; places of business; changes.

A. Each license shall state the address or addresses at which the business is to be conducted and shall state fully the legal name of the licensee, as well as any fictitious name by which the licensee is operating in the Commonwealth. Each license shall be posted prominently in each place of business of the licensee. Licenses shall not be transferable or assignable, by operation of law or otherwise. No licensee shall use any name in the Commonwealth other than the legal name or fictitious name set forth on the license issued by the Commission.

B. No licensee shall open an additional office or relocate any place of business without prior approval of the Commission. Applications for such approval shall be made in writing on a form provided by the Commissioner and shall be accompanied by payment of a $150 nonrefundable application fee. The application shall be approved unless the Commission finds that the applicant has not conducted business under this chapter efficiently, fairly, in the public interest, and in accordance with law. The application shall be deemed approved if notice to the contrary has not been mailed by the Commission to the applicant within 30 days of the date the application is received by the Commission, but this period may be extended for good cause. After approval, the applicant shall give written notice to the Commissioner within 20 days of the commencement of business at the additional location or relocated place of business.

C. Every licensee shall within 20 days notify the Commissioner, in writing, of the closing of any business location and of the name, address, and position of each new senior officer, member, partner, or director and provide such other information with respect to any such change as the Commissioner may reasonably require.

D. Every license shall remain in force until it has been surrendered, revoked, or suspended. The surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of such licensee.

2020, c. 785.

§ 6.2-2033. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire, directly or indirectly, 25 percent or more of the voting shares of a corporation, or 25 percent or more of the ownership of any other person, licensed to conduct business under this chapter unless such person first:

1. Files an application with the Commission in such form as the Commissioner may prescribe from time to time;

2. Delivers such other information to the Commissioner as the Commissioner may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, trustees, beneficiaries, principals, and members, and any proposed new directors, senior officers, principals, or members of the licensee; and

3. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant and its directors, senior officers, members, trustees, beneficiaries, and principals, and any proposed new persons having any such status have the financial responsibility, character, reputation, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by the Commissioner reciting the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

C. The provisions of this section shall not apply to (i) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person licensed by this chapter; (ii) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person affiliated through common ownership with the licensee; or (iii) the acquisition of an interest in a licensee by a person by bequest, descent, survivorship, or operation of law. The person acquiring an interest in a licensee in a transaction that is exempt from filing an application by this subsection shall send written notice to the Commissioner of such acquisition within 30 days of its closing.

2020, c. 785.

§ 6.2-2034. Retention of books, accounts, and records; responding to Bureau.

A. Every licensee shall maintain in its licensed offices such books, accounts, and records as the Commission may reasonably require in order to determine whether the licensee is complying with the provisions of this chapter and regulations adopted thereunder. Such books, accounts, and records shall be maintained apart and separate from any other business in which the licensee is involved. Such records relating to debt settlement services agreements shall be retained for at least three years after the debt settlement services agreements are terminated. To safeguard the privacy of consumers, records containing personal financial information shall be shredded, incinerated, or otherwise disposed of in a secure manner. Licensees may arrange for the shredding, incineration, or other disposal of the records from a business record destruction vendor.

B. When the Bureau requests a written response, books, records, documentation, or other information from a licensee in connection with the Bureau's investigation, enforcement, or examination of compliance with applicable laws, the licensee shall deliver a written response, as well as any requested books, records, documentation, or information within the time period specified in the Bureau's request. If no time period is specified, a written response, as well as any requested books, records, documentation, or information, shall be delivered by the licensee to the Bureau not later than 30 days from the date of such request. In determining the specified time period for responding to the Bureau and when considering a request for an extension of time to respond, the Bureau shall take into consideration the volume and complexity of the requested written response, books, records, documentation, or information and such other factors as the Bureau determines to be relevant under the circumstances.

2020, c. 785.

§ 6.2-2035. Annual report.

Each licensee under this chapter shall annually, on or before March 25, file a written report with the Commissioner containing such information as the Commissioner may require concerning the licensee's business and operations during the preceding calendar year as to each licensed place of business. Reports shall be made under oath and shall be in the form prescribed by the Commissioner.

2020, c. 785.

§ 6.2-2036. Other reporting requirements.

A. Within 15 days following the occurrence of any of the following events, a licensee shall file a written report with the Commission describing such event and its expected impact on the business of the licensee:

1. The filing of bankruptcy, reorganization, or receivership proceedings by or against the licensee;

2. The institution of administrative or regulatory proceedings against the licensee by any governmental authority;

3. Any felony indictments of the licensee or any of its members, partners, directors, officers, trustees, beneficiaries, or principals, if known;

4. Any felony conviction of the licensee or any of its members, partners, directors, officers, trustees, beneficiaries, or principals, if known;

5. The institution of an action against the licensee under the Virginia Consumer Protection Act (§ 59.1-196 et seq.) by the Attorney General or any other governmental authority; or

6. Such other event as the Commission may prescribe by regulation.

B. Within 30 days of judgment against the licensee in a civil action relating to the debt settlement services agreement of a consumer, a licensee shall file a written report with the Commission describing such event and its expected impact on the business of the licensee.

C. Within 10 days of receipt of any qualified audit, a licensee shall notify the Commission and describe what steps are being taken to address concerns raised in the audit.

2020, c. 785.

§ 6.2-2037. Investigations; examinations.

The Commission may, by its designated officers and employees, as often as it deems necessary, investigate and examine the affairs, business, premises, and records of any person licensed or required to be licensed under this chapter insofar as they pertain to any business for which a license is required by this chapter. Examinations of licensees shall be conducted at least once in each three-year period. In the course of such investigations and examinations, the owners, members, officers, directors, partners, trustees, beneficiaries, and employees of such person being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary. For the purposes of this section, the person making such investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

2020, c. 785.

§ 6.2-2038. Annual fees.

A. To defray the costs of the examination, supervision, and regulation of licensees, every licensee under this chapter shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the total number of agreements to provide debt settlement services maintained by licensees, to the actual costs of their examinations, and to other factors relating to their supervision and regulation. All such fees shall be assessed on or before June 1 for every calendar year. All such fees shall be paid by the licensee to the State Treasurer on or before July 1 following each assessment.

B. In addition to the annual fee prescribed in subsection A, when it becomes necessary to examine or investigate the books and records of a licensee under this chapter at a location outside the Commonwealth, the licensee shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement the actual travel and reasonable living expenses incurred on account of its examination, supervision, and regulation, or shall pay at a reasonable per diem rate approved by the Commission.

2020, c. 785.

§ 6.2-2039. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules.

2020, c. 785.

§ 6.2-2040. Licensees providing debt settlement services; prohibited and required business methods.

Each licensee engaged in the business of providing or offering to provide debt settlement services to any consumer shall comply with the following requirements:

1. Each debt settlement services agreement shall be evidenced by a written agreement, which shall be maintained in either a hard copy, including a faxed copy, or electronic version and which shall be signed by the consumer and a person authorized by the licensee to sign such agreements and dated the same day the debt settlement services agreement is executed by the consumer. The agreement may be signed by the parties either originally or by electronic signature. The agreement shall set forth, at a minimum, (i) the name and address of both the consumer and the licensee; (ii) a full description of all services to be performed for the consumer by the licensee; (iii) a clear explanation, highlighted in bold type, of the costs to the consumer; (iv) a statement that the debt settlement services agreement may be terminated for any reason by the consumer and that the consumer has no obligation to continue the arrangement unless satisfied with the services provided; (v) an explanation of the method of dispute resolution under the agreement; (vi) an explanation of the obligations of the consumer and the licensee that are subject to the agreement; and (vii) notification of privacy policies in compliance with state and federal laws and regulations.

2. A licensee shall give to the consumer a duplicate original of the agreement executed by the consumer and licensee upon full execution.

3. A licensee shall not request or receive payment or other compensation for any debt settlement services until and unless:

a. The licensee has negotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a debt settlement services agreement it executed with a consumer; and

b. The consumer has made at least one payment to a creditor following the licensee's negotiation, settlement, reduction, or other alteration of at least one debt owned by the consumer to that creditor.

4. Prior to the execution of a debt settlement services agreement with a consumer, a licensee shall disclose to the consumer in writing, and retain a copy of, the following:

a. The amount of time necessary to achieve the represented results and, to the extent that the services may include a settlement offer to any of the customer's creditors or debt collectors, the time by which the licensee will make a bona fide settlement offer to each of them;

b. To the extent that the services may include a settlement offer to any of the customer's creditors or debt collectors, the amount of money or the percentage of each outstanding debt that the customer must accumulate before the licensee will make a bona fide settlement offer to each of them; and

c. To the extent that any aspect of the debt settlement services relies upon or results in the consumer's failure to make timely payments to creditors or debt collectors, that the use of the debt settlement services will likely adversely affect the consumer's creditworthiness, may result in the consumer being subject to collections or sued by creditors or debt collectors, and may increase the amount of money the consumer owes due to the accrual of fees and interest.

5. A licensee shall not require a consumer to execute a power of attorney, as defined in § 64.2-1600, as a condition of receiving debt settlement services.

6. A licensee shall not require a consumer to open an account, as defined in § 6.2-604, as a condition of receiving debt settlement services. A licensee may request that a consumer open an account in connection with its provision of debt settlement services, provided that:

a. The consumer's funds are held in an account at an FDIC-insured financial institution;

b. The consumer owns the funds held in the account and is paid accrued interest on the account, if any;

c. The entity administering the account is not owned or controlled by, or in any way affiliated with, the debt settlement services provider;

d. The entity administering the account does not give or accept any money or other compensation in exchange for referrals of business involving the debt settlement services provider; and

e. The consumer may withdraw from the debt settlement services at any time without penalty and must receive all funds in the account, other than the fee earned by the debt settlement services provider for completed services, if any, subject to the limitations imposed in § 6.2-2041.

7. A licensee shall not receive a gift or bonus, premium, reward, or other compensation, directly or indirectly, for advising, arranging, or assisting an individual in connection with obtaining an extension of credit or other service from a creditor, except for educational or counseling services required in connection with a government-sponsored program.

2020, c. 785.

§ 6.2-2041. Fee.

A. For providing debt settlement services, a licensee may charge or receive a fee totaling either (i) no more than 20 percent of the principal amount of the debt enrolled by a consumer into the licensee's service or (ii) no more than 30 percent of the difference between the amount owed by a consumer at the time the licensee settles the debt and the amount to be paid by the consumer to satisfy the debt.

B. If more than one debt is the subject of a debt settlement services agreement, the licensee may only charge or collect that proportion of the total fee allowable under clause (i) of subsection A that equals the proportion of the aggregate debt the individual settled debt represents.

C. A licensee shall not charge or receive any other fee or compensation from a consumer for providing debt settlement services other than the fee provided for in this section.

2020, c. 785.

§ 6.2-2042. Advertising.

No person licensed or required to be licensed under this chapter shall use or cause to be published any advertisement that (i) contains any false, misleading, or deceptive statement or representation or (ii) identifies the person by any name other than the name set forth on the license issued by the Commission.

2020, c. 785.

§ 6.2-2043. Suspension or revocation of license.

A. The Commission may suspend or revoke any license issued under this chapter upon any of the following grounds:

1. Any ground for denial of a license under this chapter;

2. Any violation of the provisions of this chapter or regulations adopted by the Commission thereunder, or a violation of any other law or regulation applicable to the conduct of the licensee's business;

3. A course of conduct consisting of the failure to perform written agreements with consumers;

4. Conviction of a felony or misdemeanor involving fraud, misrepresentation, or deceit;

5. Entry of a judgment against the licensee involving fraud, misrepresentation, or deceit;

6. Entry of a federal or state administrative order against such licensee for violation of any law or any regulation applicable to the conduct of his business;

7. Refusal to permit an investigation or examination by the Commission;

8. Failure to pay any fee or assessment imposed by this chapter;

9. Failure to comply with any order of the Commission; or

10. Insolvency of the licensee.

B. For the purposes of this section, acts of any officer, director, member, trustee, beneficiary, partner, or principal shall be deemed acts of the licensee.

2020, c. 785.

§ 6.2-2044. Cease and desist orders.

A. If the Commission determines that any person has violated any provision of this chapter or any regulation adopted hereunder, the Commission may, upon 21 days' notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of such person or other address authorized under § 12.1-19.1 and shall state the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not issue a cease and desist order except based upon findings made at such hearing. Such hearing shall be conducted in accordance with the Commission's Rules. The Commission may enforce compliance with any order issued under this section by imposition and collection of such fines and penalties as may be prescribed by law.

B. When, in the opinion of the Commission, immediate action is required to protect the public interest, a cease and desist order may be issued without prior hearing. In such cases, the Commission shall make a hearing available to the person on an expedited basis.

C. The Commission shall have jurisdiction to enter and enforce a cease and desist order against any person, regardless of whether such person is present in the Commonwealth, who violates any provision of this chapter or any regulation adopted hereunder.

2020, c. 785.

§ 6.2-2045. Notice of proposed suspension or revocation.

The Commission shall not revoke or suspend the license of any person licensed under this chapter upon any of the grounds set forth in § 6.2-2043 until it has given the licensee 21 days' notice in writing of the reasons for the proposed revocation or suspension and an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of the licensee or other address authorized under § 12.1-19.1 and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not suspend or revoke the license except on the basis of findings made at such hearing. The hearing shall be conducted in accordance with the Commission's Rules.

2020, c. 785.

§ 6.2-2046. Civil penalties.

In addition to the authority conferred under §§ 6.2-2043 and 6.2-2044, the Commission may impose a civil penalty not exceeding $1,000 upon any person who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter. For the purposes of this section, each separate violation shall be subject to the civil penalty herein prescribed. In the case of a violation of § 6.2-2027, each debt settlement services agreement entered into shall constitute a separate violation.

2020, c. 785.

§ 6.2-2047. Criminal penalty.

Any person violating subsection A of § 6.2-2027 is guilty of a Class 1 misdemeanor. For purposes of this section, each violation shall constitute a separate offense.

2020, c. 785.

§ 6.2-2048. Private right of action.

Any person who suffers loss by reason of a violation of any provision of this chapter may bring a civil action to enforce such provision. Any person who is successful in such action shall recover reasonable attorney fees, expert witness fees, and court costs incurred by bringing such action.

2020, c. 785.

§ 6.2-2049. Authority of Attorney General; referral by Commission to Attorney General.

A. If the Commission determines that a person is in violation, or has violated, any provision of this chapter, the Commission may refer the information to the Attorney General and may request that the Attorney General investigate such violations. With or without such referral, the Attorney General is hereby authorized to seek to enjoin violations of this chapter. The circuit court having jurisdiction may enjoin such violations notwithstanding the existence of an adequate remedy at law.

B. The Attorney General may also seek, and the circuit court may order or decree, damages and such other relief allowed by law, including restitution to the extent available to consumers under applicable law. Persons entitled to any relief as authorized by this section shall be identified by order of the court within 180 days from the date of the order permanently enjoining the unlawful act or practice.

C. In any action brought by the Attorney General by virtue of the authority granted in this provision, the Attorney General shall be entitled to seek reasonable attorney fees and costs.

D. If the Attorney General files an action to enjoin violations of this chapter, the Attorney General shall provide notice of such action to the Commission.

2020, c. 785.

§ 6.2-2050. Violation of the Virginia Consumer Protection Act.

Any violation of the provisions of this chapter shall constitute a prohibited practice in accordance with § 59.1-200 and shall be subject to any and all of the enforcement provisions of the Virginia Consumer Protection Act (§ 59.1-196 et seq.).

2020, c. 785.

Chapter 21 - CHECK CASHERS

§ 6.2-2100. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Check casher" means a person engaged in the business of cashing checks, drafts, or money orders for compensation.

"Item" means a check, draft, or money order.

"Registrant" means a person registered under this chapter.

"Registration" means a registration filed under this chapter.

1995, c. 221, § 6.1-432; 2010, c. 794.

§ 6.2-2101. Registration requirement; offices.

A. No person shall engage in business as a check casher in the Commonwealth unless such person has first registered with the Commission in accordance with procedures established by the Commission under this chapter.

B. Every registered check casher shall give written notice to the Commission, within 10 days thereafter, of the opening, closing, or relocation of an office.

1995, c. 221, § 6.1-433; 1999, c. 529; 2010, c. 794.

§ 6.2-2102. Exempt persons.

This chapter shall not apply to:

1. Any person who:

a. Does not hold itself out to be a check cashing service;

b. Is principally engaged in the bona fide retail sale of goods or services;

c. Either as an incident to or independently of such a retail sale from time to time cashes items; and

d. Charges a fee or other consideration for the service that does not exceed the greater of $2 or two percent of the amount of the item; or

2. Any person authorized to engage in business as a bank, savings institution, or credit union under the laws of the United States or any state.

1995, c. 221, § 6.1-434; 2010, c. 794.

§ 6.2-2103. Registration fees; reports.

A. Each registration form shall be accompanied by payment of a $200 fee, which shall not be refundable or abated in any event.

B. To defray the costs of their examination, supervision and regulation, check cashers required to be registered under this chapter shall pay to the Commission annually on or before July 1 a registration fee in an amount prescribed by the Commission, but not exceeding $250.

C. All fees shall be paid into the state treasury and credited to the "Financial Institutions Special Fund -- State Corporation Commission."

D. Every check casher required to be registered under this chapter shall file such annual or other reports as the Commission may prescribe.

1995, c. 221, § 6.1-435; 1999, c. 529; 2010, c. 794.

§ 6.2-2104. Investigations.

The Commission, upon receiving a complaint or upon its own motion, may investigate the affairs, business, premises and records of any person required to be registered under this chapter. In the course of such investigation, all persons associated with the person being investigated shall afford full access to all premises, books, records and information which the person making such investigation deems necessary. For the foregoing purposes, the person making such investigation shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of documents and objects of all kinds.

1995, c. 221, § 6.1-436; 2010, c. 794.

§ 6.2-2105. Fees posted; endorsement of items cashed.

A. A registrant shall conspicuously post and at all times display, in every location at which it conducts the business of a check casher, a notice stating the fees charged for cashing items. A registrant shall further file with the Commissioner a statement of the fees currently charged at every such location.

B. Items cashed by registrants shall be deposited or presented for payment by the second business day from the date the item is cashed for the customer. A registrant shall endorse every item presented by the registrant for payment in the actual name under which the registrant is doing business.

C. A registrant shall post in every location at which it conducts the business of a check casher the Commission's toll-free telephone number and information on how to file a complaint pursuant to regulations adopted by the Commission.

D. A registrant shall provide each customer cashing an item with a receipt showing the name or trade name of the registrant, the transaction date, the amount of the check, the fee charged, and the cash given.

1995, c. 221, § 6.1-437; 2010, c. 794.

§ 6.2-2106. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulations, the Commission shall give reasonable notice of the content thereof, and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules.

1995, c. 221, § 6.1-438; 2010, c. 794.

§ 6.2-2107. Prohibited practices.

No person required to be registered under this chapter shall:

1. Engage in the business of making loans of credit, goods, or things; or discounting notes, bills of exchange, items, or other evidences of debt; or accepting deposits or bailments of money or items without meeting the requirements of the laws of the Commonwealth;

2. Cash post-dated items, other than government or payroll checks;

3. Use, or cause to be published or disseminated, any advertisement or communication that (i) contains any false, misleading, or deceptive statement or representation or (ii) identifies the person by any name other than the name or trade name set forth on the registration;

4. Engage in unfair, deceptive, or fraudulent practices; or

5. Make loans unless such person is licensed under, and the loans are made in accordance with, Chapter 18 (§ 6.2-1800 et seq.).

1995, c. 221, § 6.1-439; 2002, c. 897; 2010, c. 794.

§ 6.2-2107.1. Recordkeeping requirements.

A. As used in this section, a customer's "identification document" means any of the following:

1. A state-issued driver's license or identification card;

2. A U.S. government resident alien identification card;

3. A passport;

4. A U.S. military identification card;

5. A Non-U.S. government identification card;

6. A Mexican Matricula identification card; or

7. Other government identification card.

B. A registrant shall not cash an item for a customer in the course of conducting its business unless the registrant:

1. Makes a copy of both sides of the item or maintains a record of the following information that is available from the item:

a. ABA number;

b. Account number;

c. Check number;

d. Check type;

e. Date of check; and

f. Check amount; and

2. Makes a copy of an identification document that is presented by the customer to the registrant at the time the customer presents the item for cashing or maintains a record of the following information that is available from the identification:

a. Name;

b. Address;

c. Date of birth;

d. Type of identification;

e. Identification number; and

f. Identification expiration date.

C. A registrant shall maintain the information required by subsection B and a record of the time and date of the transaction. Such materials shall be maintained for a period of not less than six months following the date an item is cashed.

D. The provisions of this section shall not apply to any registrant that is principally engaged in the bona fide retail sale of goods or services.

2014, c. 768.

§ 6.2-2108. Civil penalties; civil action.

A. The Commission may impose a civil penalty not exceeding $1,000 upon any person required to be registered hereunder who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter or regulations adopted thereunder. However, the civil penalty that may be imposed upon any registrant who has violated a provision of § 6.2-2107.1 shall not exceed $100. For the purposes of this section, each separate violation shall be subject to the civil penalty therein prescribed.

B. Any person who suffers loss by reason of a violation of any provision of this chapter, other than a violation of a provision of § 6.2-2107.1, may bring a civil action to enforce such provision. Any person who is successful in such action shall recover reasonable attorney fees, expert witness fees, and court costs incurred by bringing such action.

1995, c. 221, § 6.1-440; 2010, c. 794; 2014, c. 768.

§ 6.2-2109. Criminal penalties.

Any person required to be registered under this chapter who acts as a check casher without first registering with the Commission as required by § 6.2-2101 is guilty of a Class 1 misdemeanor. For the purposes of this section, each transaction entered into involving the cashing of an item by such person shall constitute a separate offense.

1995, c. 221, § 6.1-441; 2010, c. 794.

§ 6.2-2110. Revocation of registration.

A. The Commission may revoke a registration under this chapter upon any of the following grounds:

1. Any violation of the provisions of this chapter or regulations adopted thereunder or of any law or regulation applicable to the conduct of the registrant's business;

2. Charging fees for cashing items in excess of fees posted at any place of business or filed with the Commission pursuant to § 6.2-2105;

3. Conviction of a felony or misdemeanor involving fraud, misrepresentation, deceit, false swearing, or theft; or

4. Refusal to permit or respond to an investigation by the Commission.

B. For the purposes of this section, acts of any officer, director, member, partner, or principal shall be deemed acts of the registrant.

1995, c. 221, § 6.1-442; 2010, c. 794.

§ 6.2-2111. Notice of proposed revocation.

The Commission may not revoke a registration under this chapter until it has given the registrant 21 days' notice in writing of the grounds for the proposed revocation and an opportunity to be heard. The notice shall be served in accordance with § 12.1-19.1. Within 14 days of mailing the notice, the registrant may file with the clerk of the Commission a written request for a hearing. If a written request for a hearing is filed, the Commission shall not revoke the registration except based upon findings made at such hearing.

1995, c. 221, § 6.1-443; 2010, c. 794.

Chapter 22 - MOTOR VEHICLE TITLE LOANS

§ 6.2-2200. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Affiliate" means a person related to a licensee by common ownership or control, or any employee or agent of a licensee.

"Annual percentage rate" has the same meaning as in the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) and its implementing regulations, as they may be amended from time to time. All fees and charges payable directly or indirectly by a borrower to a licensee as a condition to a loan, including interest and the monthly maintenance fees authorized under § 6.2-2216, shall be included in the computation of the annual percentage rate.

"Bond" includes any form of financial instrument that provides security equivalent to that provided by a bond, such as an irrevocable letter of credit, if its use in lieu of a bond is authorized pursuant to regulations adopted by the Commission.

"Interest" means all charges payable directly or indirectly by a borrower to a licensee as a condition to a loan, including fees, service charges, and renewal charges, and any ancillary product sold in connection with a loan, but does not include the monthly maintenance fees, deposit item return fees, late charges, or reasonable costs of repossession and sale authorized under § 6.2-2216.

"Licensee" means a person to whom a license has been issued under this chapter.

"Loan amount" means the principal amount of a loan exclusive of fees or charges.

"Motor vehicle" means an automobile, motorcycle, mobile home, truck, van, or other vehicle operated on public highways and streets.

"Motor vehicle title loan" or "title loan" means a loan secured by a non-purchase money security interest in a motor vehicle.

"Motor vehicle title loan agreement" or "loan agreement" means a written document that sets out the terms and conditions under which a licensee agrees to make a motor vehicle title loan to a borrower, and the borrower agrees to give to the licensee a security interest in a motor vehicle owned by the borrower to secure repayment of the motor vehicle title loan and performance of the other obligations under the loan agreement.

"Person" means any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, or other legal or commercial entity.

"Principal" means any person who, directly or indirectly, owns or controls (i) 10 percent or more of the outstanding stock of a stock corporation or (ii) a 10 percent or greater interest in any other type of entity.

2010, c. 477, § 6.1-480; 2020, cc. 1215, 1258.

§ 6.2-2201. License required.

A. Unless exempted from the provisions of this chapter pursuant to § 6.2-2202:

1. No person shall engage in the business of making motor vehicle title loans to residents of the Commonwealth or to any individuals in the Commonwealth, whether or not the person has a location in the Commonwealth, except in accordance with the provisions of this chapter and without having first obtained a license under this chapter from the Commission;

2. No person shall engage in the business of arranging or brokering motor vehicle title loans for residents of the Commonwealth, or any individuals in the Commonwealth, whether or not the person has a location in the Commonwealth; and

3. Any loan made in violation of this section is void, and no person shall have the right to collect, receive, or retain any principal, interest, fees, or other charges in connection with the loan.

B. The provisions of subsection A shall apply to any person who seeks to evade its application by any device, subterfuge, or pretense whatsoever, including:

1. The loan, forbearance, use, or sale of (i) credit, as guarantor, surety, endorser, comaker, or otherwise; (ii) money; (iii) goods; or (iv) things in action;

2. The use of collateral or related sales or purchases of goods or services, or agreements to sell or purchase, whether real or pretended; receiving or charging compensation for goods or services, whether or not sold, delivered, or provided; and

3. The real or pretended negotiation, arrangement, or procurement of a loan through any use or activity of a third person, whether real or fictitious.

2010, c. 477, § 6.1-481; 2011, c. 418; 2020, cc. 1215, 1258.

§ 6.2-2202. Scope of chapter.

A. The provisions of this chapter shall not apply to any bank, savings institution, or credit union, or to a person licensed under Chapter 15 (§ 6.2-1500 et seq.), that does not elect to become licensed under this chapter. Electing to become licensed under this chapter, however, shall constitute a waiver of the benefit of any and all laws of the Commonwealth and other states, territories, possessions, and districts of the United States and federal laws preemptive of, or inconsistent with, the provisions of this chapter.

B. The provisions of this chapter shall not apply to extensions of credit for the sole purpose of financing the purchase of a motor vehicle, or of refinancing a purchase money loan, secured by a lien on the motor vehicle.

2010, c. 477, § 6.1-482.

§ 6.2-2203. Application for license; form; content; fee.

A. An application for a license under this chapter shall be made in writing, under oath, and on a form provided by the Commissioner.

B. The application shall set forth:

1. The name and address of the applicant and (i) if the applicant is a partnership, firm, or association, the name and address of each partner or member; (ii) if the applicant is a corporation or limited liability company, the name and address of each director, member, registered agent, and principal; or (iii) if the applicant is a business trust, the name and address of each trustee and beneficiary;

2. The addresses of the locations of the business to be licensed; and

3. Such other information concerning the financial responsibility, background, experience, and activities of the applicant and its members, officers, directors, and principals as the Commissioner may require.

C. The application shall be accompanied by payment of an application fee of $500, or other reasonable amount that the Commission may prescribe by regulation.

D. The application fee shall not be refundable in any event. The fee shall not be abated by surrender, suspension, or revocation of the license.

2010, c. 477, § 6.1-483; 2020, cc. 1215, 1258.

§ 6.2-2204. Bond required.

The application for a license shall also be accompanied by a bond filed with the Commissioner with corporate surety authorized to execute such bond in the Commonwealth, in the sum of $50,000 per location, or such greater sum as the Commission may require, but not to exceed a total of $500,000. The form of such bond shall be approved by the Commission. Such bond shall be continuously maintained thereafter in full force. Such bond shall be conditioned upon the applicant or licensee performing all written agreements with borrowers or prospective borrowers, correctly and accurately accounting for all funds received by him in his licensed business, and conducting his licensed business in conformity with this chapter and all applicable laws. Any person who may be damaged by noncompliance of the licensee with any condition of such bond may proceed on such bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

2010, c. 477, § 6.1-484; 2020, cc. 1215, 1258.

§ 6.2-2205. Investigation of applications.

The Commissioner may make such investigations as he deems necessary to determine if the applicant has complied with all applicable provisions of law and regulations adopted thereunder.

2010, c. 477, § 6.1-485.

§ 6.2-2206. Qualifications.

A. Upon the filing and investigation of an application for a license, and compliance by the applicant with the provisions of §§ 6.2-2203 and 6.2-2204, the Commission shall issue and deliver to the applicant the license applied for to engage in business under this chapter at the locations specified in the application if it finds:

1. That the financial responsibility, character, reputation, experience, and general fitness of the applicant and its members, senior officers, directors, trustees, and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law; and

2. That the applicant has unencumbered liquid assets per location available for the operation of the business of at least $75,000.

B. If the Commission fails to make such findings, no license shall be issued and the Commissioner shall notify the applicant of the denial and the reasons for such denial.

2010, c. 477, § 6.1-486.

§ 6.2-2207. Licenses; places of business; changes.

A. Each license shall state the address or addresses at which the business is to be conducted and shall state fully the legal name of the licensee as well as any fictitious name by which the licensee is operating in the Commonwealth. Each license shall be posted prominently in each place of business of the licensee. Licenses shall not be transferable or assignable, by operation of law or otherwise. No licensee shall use any name in the Commonwealth other than the legal name or fictitious name set forth on the license issued by the Commission.

B. No licensee shall open an additional office or relocate any place of business without prior approval of the Commission. Applications for such approval shall be made in writing on a form provided by the Commissioner and shall be accompanied by payment of a $150 nonrefundable application fee or other reasonable amount that the Commission may prescribe by regulation. The application shall be approved unless the Commission finds that the applicant does not have the required liquid assets or has not conducted business under this chapter efficiently, fairly, in the public interest, and in accordance with law. The application shall be deemed approved if notice to the contrary has not been mailed by the Commission to the applicant within 30 days of the date the application is received by the Commission. After approval, the applicant shall give written notice to the Commissioner within 10 days of the commencement of business at the additional location or relocated place of business.

C. Every licensee shall within 10 days notify the Commissioner, in writing, of the closing of any business location and of the name, address, and position of each new senior officer, member, partner, or director and provide such other information with respect to any such change as the Commissioner may reasonably require.

D. Every license shall remain in force until it has been surrendered, revoked, or suspended. The surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of such licensee.

2010, c. 477, § 6.1-487; 2020, cc. 1215, 1258.

§ 6.2-2208. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire, directly or indirectly, 25 percent or more of the voting shares of a corporation or 25 percent or more of the ownership of any other person licensed to conduct business under this chapter unless such person first:

1. Files an application with the Commission in such form as the Commissioner may prescribe from time to time;

2. Delivers such other information to the Commissioner as the Commissioner may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, principals, and members and of any proposed new directors, senior officers, principals, or members of the licensee; and

3. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant, its members if applicable, its directors, senior officers, trustees, and principals and any proposed new directors, members, senior officers, trustees, and principals have the financial responsibility, character, reputation, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by order of the Commissioner reciting the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

C. The provisions of this section shall not apply to (i) the acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation by or with a person licensed under this chapter; (ii) the acquisition of an interest in a licensee, directly or indirectly, by merger or consolidation by or with a person affiliated through common ownership with the licensee; or (iii) the acquisition of an interest in a licensee by bequest, descent, survivorship, or operation of law. The person acquiring an interest in a licensee in a transaction that is exempt from filing an application by this subsection shall send written notice to the Commissioner of such acquisition within 30 days of its closing.

2010, c. 477, § 6.1-488.

§ 6.2-2209. Retention of books, accounts, and records.

Every licensee shall maintain in its licensed offices such books, accounts, and records as the Commission may reasonably require in order to determine whether such licensee is complying with the provisions of this chapter and rules and regulations adopted in furtherance thereof. Such books, accounts, and records shall be maintained apart and separate from any other business in which the licensee is involved. Such records relating to title loans shall be retained for at least three years after final payment is made on any title loan.

2010, c. 477, § 6.1-489.

§ 6.2-2210. Annual report.

A. Each licensee under this chapter shall annually, on or before March 25, file a written report with the Commissioner containing such information as the Commissioner may require concerning his business and operations during the preceding calendar year as to each licensed place of business. Reports shall be made under oath and shall be in the form prescribed by the Commissioner.

B. The Commissioner shall publish annually and make available to the public an analysis of the information required under this section and other information the Commissioner may choose to include. The published analysis shall include all of the following:

1. The total number of borrowers, loans, defaulted loans, and charged-off loans and the total dollar value of the charged-off loans;

2. The average loan size, average contracted annual percentage rate, average contracted charges per loan, total contracted loan charges, and total loan charges actually paid;

3. The total number of deposit item return fees and the total dollar value of those charges;

4. The total number of licensee business locations and the average number of borrowers per location;

5. The total number of title loan contracts that resulted in repossession or surrender of a vehicle, the total number of title loan contracts that resulted in a borrower redeeming a repossessed or surrendered vehicle, the total number of repossessed or surrendered vehicles that were sold, the total fair market value of repossessed or surrendered vehicles that were sold as stated in the loan contracts, the total amount of proceeds licensees received from the sale of repossessed or surrendered vehicles, the total amount of sale proceeds in excess of the redemption amount paid to borrowers as described in subsection C of § 6.2-2217, the total amount of charges licensees received from borrowers related to the repossession and sale of vehicles, and the percentage of all title loan contracts that resulted in a repossession of a vehicle; and

6. A summary of pending and completed enforcement actions, which shall include lists of suspended or revoked licenses, cease and desist orders, and civil penalties pursuant to this chapter.

2010, c. 477, § 6.1-490; 2020, cc. 1215, 1258.

§ 6.2-2211. Other reporting requirements.

Within 15 days following the occurrence of any of the following events, a licensee shall file a written report with the Commission describing such event and its expected impact upon the business of the licensee:

1. The filing of bankruptcy, reorganization, or receivership proceedings by or against the licensee;

2. The institution of administrative or regulatory proceedings against the licensee by any governmental authority;

3. Any felony indictments of the licensee or any of its members, partners, directors, officers, or principals;

4. Any felony conviction of the licensee or any of its members, partners, directors, officers, or principals; and

5. Such other event as the Commission may prescribe by regulation.

2010, c. 477, § 6.1-491.

§ 6.2-2212. Investigations; examinations.

The Commission may, by its designated officers and employees, as often as it deems necessary, investigate and examine the affairs, business, premises, and records of any person licensed or required to be licensed under this chapter insofar as they pertain to any business for which a license is required by this chapter. Examinations of licensees shall be conducted at least once in each three-year period. In the course of such investigations and examinations, the owners, members, officers, directors, partners, trustees, beneficiaries, and employees of such person being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary. For the foregoing purposes, the person making such investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

2010, c. 477, § 6.1-492.

§ 6.2-2213. Annual fees.

A. In order to defray the costs of their examination, supervision, and regulation, every licensee under this chapter shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the business volume of such licensees, the actual costs of their examinations, and other factors relating to their supervision and regulation. All such fees shall be assessed on or before September 15 for every calendar year. All such fees shall be paid by the licensee to the State Treasurer on or before October 15 following each assessment.

B. In addition to the annual fee prescribed in subsection A, when it becomes necessary to examine or investigate the books and records of a licensee under this chapter at a location outside the Commonwealth, the licensee shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement, the actual travel and reasonable living expenses incurred on account of its examination, supervision, and regulation, or shall pay at a reasonable per diem rate approved by the Commission.

2010, c. 477, § 6.1-493.

§ 6.2-2214. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules of Practice and Procedure.

2010, c. 477, § 6.1-494.

§ 6.2-2215. Required and prohibited business methods.

Each licensee shall comply with the following requirements and prohibitions:

1. A licensee shall not make a loan that does not comply with § 6.2-2215.1;

2. A licensee shall not charge, collect, or receive, directly or indirectly, credit insurance premiums, charges for any ancillary product sold, charges for disbursing loan proceeds or refunds including check-cashing charges and any other charges for negotiating forms of payment other than cash, charges for brokering or obtaining a loan, or any fees, interest, or charges in connection with a loan, other than fees and charges permitted by § 6.2-2216;

3. A licensee shall not make a loan to a person if that person is obligated upon any loan to a person licensed under Chapter 18 (§ 6.2-1800 et seq.). Prior to making a loan, a licensee shall make a reasonable attempt to verify the prospective borrower's eligibility under this section which shall include reviewing the files of any affiliate that is licensed under Chapter 18. Unless the Commission requires otherwise by administrative rule or policy statement, a licensee may rely on the loan applicant's written representations with respect to the applicant's obligations to lenders that are licensed under Chapter 18 but are not affiliates of the licensee and a licensee is not subject to any administrative penalty or civil liability if such representations are later determined to be inaccurate;

4. Except as provided in § 6.2-2216.2, a licensee shall not refinance, renew, or extend any title loan or make a loan to a person if the loan would cause the person to have more than one title loan from any licensee outstanding at the same time;

5. Before entering into a motor vehicle title loan, a licensee shall provide each borrower with a pamphlet, in a form consistent with regulations adopted by the Commission, explaining in plain language the rights and responsibilities of the borrower and providing a toll-free number at the Commission for assistance with complaints;

6. A licensee shall not cause any person to be obligated to the licensee in any capacity at any time in the principal amount of more than $2,500;

7. A licensee shall not obtain any agreement from the borrower (i) giving the licensee or any third person power of attorney or authority to confess judgment for the borrower; (ii) authorizing the licensee or any third party to bring suit against the borrower in a court outside the Commonwealth; or (iii) waiving the borrower's right to legal recourse or any other right the borrower has under any otherwise applicable provision of state or federal law;

8. A motor vehicle title loan agreement shall not (i) contain a provision by which a person acting on behalf of the licensee is treated as an agent of the borrower in connection with its formation or execution other than for purposes of filing or releasing a lien with the state where the motor vehicle is registered or (ii) be sold or otherwise assigned to any other person who is not also a licensee, and if a loan agreement is sold or assigned to another licensee, the buyer or assignee of the loan agreement shall be subject to the same obligations under this chapter that apply to the selling or assigning licensee. If a motor vehicle title loan or its servicing is sold or assigned, a licensee shall provide to the borrower written notice and the information needed to make future payments no later than 10 days before the borrower's next payment due date;

9. Loan proceeds shall be disbursed (i) in cash, (ii) by the licensee's business check, or (iii) by debit card provided that the borrower will not be directly charged a fee by the licensee in connection with the withdrawal of the funds. No fee shall be charged by the licensee or affiliate for cashing a title loan proceeds check;

10. A licensee shall not (i) accept a check, real or personal property, or any interest in any property other than the title of one motor vehicle owned by the borrower as security for a title loan; (ii) create or accept any remotely created check, as defined in 12 C.F.R. § 229.2(fff), in connection with a loan; (iii) draft funds electronically from a borrower's account without express written authorization from the borrower; (iv) fail to stop attempts to draft funds electronically from a borrower's account upon request from the borrower or his agent; or (v) require or accept from a borrower a set of keys to a motor vehicle that secures a loan. Nothing in this subdivision shall prohibit the conversion of a negotiable instrument into an electronic form for processing through the automated clearing house system. For purposes of this subdivision, "motor vehicle" includes any accessories or accessions to a motor vehicle that are affixed thereto;

11. A licensee shall not attempt to draft funds electronically from a borrower's account after two consecutive attempts have failed, unless the licensee obtains new written authorization from the borrower to transfer or withdraw funds electronically from the borrower's account;

12. A licensee shall not make a motor vehicle title loan if, on the date the loan agreement is signed by the borrower, the motor vehicle's certificate of title evidences that the motor vehicle is security for another loan or otherwise is encumbered by a lien;

13. A licensee shall (i) hold the certificate of title to the motor vehicle throughout the period that the loan agreement is in effect and (ii) within seven days following the date of the motor vehicle title loan agreement, file to have its security interest in the motor vehicle added to its certificate of title by complying with the requirements of § 46.2-637, or in the case of a motor vehicle registered in a state other than the Commonwealth by complying with that state's requirements for perfecting a security interest in a motor vehicle;

14. A licensee shall not knowingly make a title loan to a borrower to enable the borrower to (i) pay for any other product or service sold at the licensee's business location or by an affiliate or (ii) repay any amount owed to the licensee or an affiliate of the licensee in connection with another credit transaction;

15. A licensee shall conspicuously post in each licensed location (i) a schedule of finance charges on a title loan, using as an example a $1,000 loan that is repaid over a 12-month period and (ii) a notice containing the following statement: "Should you wish to file a complaint against us, you may contact the Bureau of Financial Institutions at [insert contact information]." The Commission shall furnish licensees with the appropriate contact information;

16. A licensee or affiliate shall not knowingly make a motor vehicle title loan to a covered member of the armed forces or a dependent of such member. Prior to making a motor vehicle title loan, every licensee or affiliate shall inquire of every prospective borrower if the individual is a covered member of the armed forces or a dependent of a covered member. The prospective borrower shall affirm in writing to the licensee or affiliate if he is not a covered member of the armed forces or a dependent of a covered member. For purposes of this section, "covered member of the armed forces" means a person on active duty under a call or order that does not specify a period of 30 days or less or on active guard and reserve duty. For purposes of this section, "dependent of a covered member of the armed forces" means the member's spouse, the member's child as defined by 38 U.S.C. § 101 (4), or an individual for whom the member provided more than one-half of the individual's support for 180 days immediately preceding the date the motor vehicle title loan is sought;

17. In collecting or attempting to collect a motor vehicle title loan, a licensee shall comply with the restrictions and prohibitions applicable to debt collectors contained in the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) regarding harassment or abuse, false, misleading or deceptive statements or representations, and unfair practices in collections;

18. A licensee shall not contact a borrower for any reason other than (i) for the borrower's benefit regarding upcoming payments, options for obtaining loans, payment options, payment due dates, the effect of default, or, after default, receiving payments or other actions permitted by the licensee; (ii) to advise the borrower of missed payments or dishonored checks; (iii) to advise the borrower regarding a repossessed or surrendered vehicle; or (iv) to assist the transmittal of payments via a third-party mechanism;

19. A licensee shall not make a loan to a borrower that includes an acceleration clause or a demand feature that permits the licensee, in the event the borrower fails to meet the repayment terms for any outstanding balance, to terminate the loan in advance of the original maturity date and to demand repayment of the entire outstanding balance, unless both of the following conditions are met: (i) not earlier than 10 days after the borrower's payment was due, the licensee provides written notice to the borrower of the termination of the loan and (ii) in addition to the outstanding balance, the licensee collects only prorated interest and the fees earned up to the date the loan was terminated or the borrower's vehicle was repossessed or surrendered, whichever is earlier. For purposes of this subsection, the outstanding balance and prorated interest and fees shall be calculated as if the borrower had voluntarily prepaid the loan in full on the date of termination, repossession, or surrender;

20. A licensee shall not recommend to a borrower that the borrower obtain a loan for a dollar amount that is higher than the borrower has requested;

21. A licensee shall not (i) engage in any unfair, misleading, deceptive, or fraudulent acts or practices in the conduct of its business or (ii) threaten, or cause to be instigated, criminal proceedings against a borrower arising from the borrower's failure to pay any sum due under a loan agreement;

22. A licensee shall provide a safe place for the keeping of all certificates of title while they are in its possession;

23. A licensee may require a borrower to purchase or maintain property insurance upon a motor vehicle securing a title loan made pursuant to this chapter. A licensee may not require the borrower to obtain such insurance from a particular provider; and

24. If a licensee or any person acting at its direction takes possession of a motor vehicle securing a title loan, the vehicle and any personal items in it shall be stored in a secure location.

2010, c. 477, § 6.1-495; 2011, c. 418; 2016, c. 501; 2020, cc. 1215, 1258.

§ 6.2-2215.1. Loan terms and conditions.

A licensee may engage in the business of making motor vehicle title loans provided that each loan meets all of the following conditions:

1. The total amount of the loan does not exceed $2,500.

2. The minimum duration of the loan is six months and the maximum duration of the loan is 24 months; however, the minimum duration of the loan may be less than six months if the total monthly payment on the loan does not exceed the greater of an amount that is (i) five percent of the borrower's verified gross monthly income or (ii) six percent of the borrower's verified net monthly income.

3. The loan is made pursuant to a written loan contract that sets forth the terms and conditions of the loan, which shall be signed by the borrower and a person authorized by the licensee to sign such agreements and dated the same day the loan is made and disbursed. A copy of the signed loan contract shall be provided to the borrower. The loan contract shall disclose in a clear and concise manner all of the following:

a. The principal amount of the loan and the total amount of fees and charges the borrower will be required to pay in connection with the loan pursuant to the loan contract.

b. The amount of each payment of principal and interest, when each payment is due, the total number of payments that the borrower will be required to make under the loan contract, and the loan's maturity date.

c. The make, model, year, and vehicle identification number of the motor vehicle in which a security interest is being given as security for the loan, and the fair market value of the vehicle which value the licensee shall determine by reference to the value for the motor vehicle specified in a recognized pricing guide if the motor vehicle is included in a recognized pricing guide.

d. A statement, printed in a minimum font size of 10 points, that informs the borrower that complaints regarding the loan or lender may be submitted to the Bureau and includes the correct telephone number, website address, and mailing address for the Bureau.

e. Any disclosures required under the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) and its implementing regulations, as they may be amended from time to time.

f. The annual percentage rate.

g. A statement, printed in a minimum font size of 10 points, as follows: "This loan is made pursuant to Chapter 22 of Title 6.2 of the Code of Virginia. You have the right to rescind or cancel this loan by returning the loan proceeds check or the originally contracted loan amount by 5 p.m. of the third business day immediately following the day you enter into this contract."

h. A statement, printed in a minimum font size of 10 points, as follows: "Electronic payment is optional. You have the right to revoke or remove your authorization for electronic payment at any time."

i. The borrower's mailing address.

j. A statement, printed in at least 14-point bold type immediately above the borrower's signature, as follows:

YOU ARE PLEDGING YOUR MOTOR VEHICLE AS COLLATERAL FOR THIS LOAN. IF YOU FAIL TO REPAY THE LOAN PURSUANT TO THIS AGREEMENT, WE MAY REPOSSESS YOUR MOTOR VEHICLE.

UNLESS YOU CONCEAL OR INTENTIONALLY DAMAGE THE MOTOR VEHICLE, OR OTHERWISE IMPAIR OUR SECURITY INTEREST BY PLEDGING THE MOTOR VEHICLE TO A THIRD PARTY OR PLEDGING A MOTOR VEHICLE TO US THAT IS ALREADY SUBJECT TO AN UNDISCLOSED EXISTING LIEN, YOUR LIABILITY FOR DEFAULTING UNDER THIS LOAN IS LIMITED TO THE LOSS OF THE MOTOR VEHICLE.

IF YOUR MOTOR VEHICLE IS SOLD DUE TO YOUR DEFAULT, YOU ARE ENTITLED TO ANY SURPLUS OBTAINED AT SUCH SALE BEYOND WHAT IS OWED PURSUANT TO THIS AGREEMENT ALONG WITH ANY REASONABLE COSTS OF RECOVERY AND SALE.

k. Such other information relating to the loan as the Commission shall determine, by regulation, is necessary to ensure that the borrower is provided adequate notice of the relevant provisions of the loan.

4. The loan is a precomputed loan and is payable in substantially equal installments consisting of principal, fees, and interest combined. For purposes of this section, "precomputed loan" means a loan in which the debt is a sum comprising the principal amount and the amount of fees and interest computed in advance on the assumption that all scheduled payments will be made when due.

5. The loan may be rescinded or canceled on or before 5 p.m. of the third business day immediately following the day of the loan transaction upon the borrower returning the original loan proceeds check or paying to the licensee, in the form of cash or other good funds instrument, the loan proceeds.

2020, cc. 1215, 1258.

§ 6.2-2216. Authorized fees and charges.

A. A licensee may charge, collect, and receive only the following fees and charges in connection with a motor vehicle title loan, provided such fees and charges are set forth in the written loan contract described in § 6.2-2215.1:

1. Interest at a simple annual rate not to exceed 36 percent;

2. Subject to § 6.2-2216.1, a monthly maintenance fee that does not exceed the lesser of eight percent of the originally contracted loan amount or $15, provided the fee is not added to the loan balance on which interest is charged;

3. Any deposit item return fee incurred by the licensee, not to exceed $25, if a borrower's check or electronic draft is returned because the account on which it was drawn was closed by the borrower or contained insufficient funds, or the borrower stopped payment of the check or electronic draft;

4. Damages and costs to which the licensee may become entitled to by law in connection with any civil action to collect a loan after default, except that the total amount of damages and costs shall not exceed the originally contracted loan amount;

5. Reasonable costs of repossession and sale of the motor vehicle in accordance with § 6.2-2217, provided that the total amount of such costs of repossession and sale that a licensee or any person working on its behalf may charge or receive from the borrower shall be limited to an amount equal to five percent of the originally contracted loan amount; and

6. A late charge in accordance with the provisions of § 6.2-400 provided that the late charge shall not exceed $20.

B. Notwithstanding anything set forth in subsection A, other provisions of this chapter, or in a motor vehicle title loan agreement, interest shall not accrue on the principal balance of a motor vehicle title loan from and after:

1. The date that the motor vehicle securing the title loan is repossessed by or at the direction of the licensee; or

2. Sixty days after the borrower has failed to make a monthly payment on a motor vehicle title loan as required by the loan agreement unless the borrower has not surrendered the motor vehicle and the borrower is concealing the motor vehicle.

C. A licensee shall not be entitled to collect or recover from a borrower any sum otherwise permitted pursuant to § 6.2-302, 8.01-27.2, or 8.01-382. In no event shall the borrower be liable for fees incurred in connection with the storage of a motor vehicle securing a title loan.

D. If any person causes a borrower to pay fees related to repossession or sale of the motor vehicle in excess of the amount allowed under subdivision A 5, or any fee to store the motor vehicle, the borrower shall be entitled to recover such amounts or fees from the licensee upon presenting a valid receipt.

2010, c. 477, § 6.1-496; 2020, cc. 1215, 1258.

§ 6.2-2216.1. Inflation adjustment of maximum monthly maintenance fee.

The Commission may, from time to time, by regulation, adjust the dollar amount of $15 specified in subdivision A 2 of § 6.2-2216 to reflect the rate of inflation from the previous date that the dollar amount was established, as measured by the Consumer Price Index or other method of measuring the rate of inflation which the Commission determines is reliable and generally accepted.

2020, cc. 1215, 1258.

§ 6.2-2216.2. Refinancing of motor vehicle title loan.

Subject to subsection F of § 6.2-2216.3, a licensee may refinance a title loan, provided that the refinanced loan is also a title loan.

2020, cc. 1215, 1258.

§ 6.2-2216.3. Statement of balance due; repayment and refunds.

A. The licensee shall, upon the request of the borrower or his agent, provide a statement of balance due on a motor vehicle title loan.

B. A borrower shall be permitted to make partial payments, in increments of not less than $5, on the loan at any time prior to maturity, without charge. The licensee shall give the borrower dated receipts for each payment made, which shall state the updated balance due on the loan.

C. When providing a statement of balance due on the loan, the licensee shall state the amount required to discharge the borrower's obligation in full as of the date the notice is provided and for each of the next three business days following that date. If the licensee cannot reasonably supply a firm statement of balance due when requested or required, the licensee may provide a good faith estimate of the balance due immediately and provide to the borrower or his agent a firm statement of balance due within two business days.

D. The licensee shall provide any statement of balance due verbally and in writing, and shall not fail to provide the information by phone upon the request of the borrower or his agent.

E. A licensee shall not fail to accept cash or other good funds instrument from the borrower, or a third party when submitted on behalf of the borrower, for repayment of a title loan in full or in part. Payments shall be credited by the licensee on the date received.

F. Notwithstanding any other provision of law, if a title loan is prepaid in full or refinanced prior to the loan's maturity date, the licensee shall refund to the borrower a prorated portion of loan charges based on a ratio of the number of days the loan was outstanding and the number of days for which the loan was originally contracted. For purposes of this section, all charges made in connection with the loan shall be included when calculating the loan charges except for deposit item return fees, late charges, and reasonable costs of repossession and sale authorized under § 6.2-2216.

G. The licensee shall provide any refund due to a borrower in the form of cash or business check as soon as reasonably possible and not later than two business days after receiving payment from the borrower.

H. Upon repayment of the loan in full, the licensee shall (i) mark the original loan agreement with the word "paid" or "canceled," return it to the borrower, and retain a copy in its records and (ii) promptly release any security interest in a motor vehicle.

I. When releasing a security interest in a motor vehicle, a licensee shall (i) take any action necessary to reflect the termination of its lien on the motor vehicle's certificate of title and (ii) promptly return the certificate of title to the borrower.

2020, cc. 1215, 1258.

§ 6.2-2216.4. Restriction on certain fees and charges.

Notwithstanding any provision of this chapter to the contrary, a licensee shall not contract for, charge, collect, or receive in connection with a motor vehicle title loan a total amount of fees and charges that exceeds either (i) 50 percent of the originally contracted loan amount, if the originally contracted loan amount was $1,500 or less, or (ii) 60 percent of the originally contracted loan amount, if the originally contracted loan amount was greater than $1,500. For purposes of this section, all charges made in connection with the loan shall be included when calculating the total loan charges except for deposit item return fees, late charges, and reasonable costs of repossession and sale authorized under § 6.2-2216.

2020, cc. 1215, 1258.

§ 6.2-2216.5. Verification of borrower's income.

Before initiating a motor vehicle title loan transaction with a borrower, a licensee shall make a reasonable attempt to verify the borrower's income. At a minimum, the licensee shall obtain from the borrower one or more recent pay stubs or other written evidence of recurring income, such as a bank statement. The written evidence shall include at least one document that, when presented to the licensee, is dated not earlier than 45 days prior to the borrower's initiation of the title loan transaction.

2020, cc. 1215, 1258.

§ 6.2-2217. Limited recourse; repossession and sale of motor vehicle.

A. Except as otherwise provided in subsection E, a licensee taking a security interest in a motor vehicle pursuant to this chapter shall be limited, upon default by the borrower, to seeking repossession of, preparing for sale, and selling the motor vehicle in accordance with Title 8.9A. Unless (i) the licensee, at least 10 days prior to repossessing the motor vehicle securing a title loan, has sent to the borrower, by first class mail, written notice advising the borrower that his title loan is in default and stating that the motor vehicle may be repossessed unless the principal and interest owed under the loan agreement are paid and (ii) the borrower does not pay such principal and interest prior to the date the motor vehicle is repossessed by or at the direction of the licensee, then the licensee shall not collect or charge the costs of repossessing and selling the motor vehicle described in subdivision A 5 of § 6.2-2216. A licensee shall not repossess a motor vehicle securing a title loan prior to the date specified in the notice. Except as otherwise provided in subsection E, a licensee shall not seek or obtain a personal money judgment against a borrower for any amount owed under a loan agreement or any deficiency resulting after the sale of a motor vehicle.

B. At least 15 days prior to the sale of a motor vehicle, a licensee shall (i) notify the borrower of the date and time after which the motor vehicle is subject to sale and (ii) provide the borrower with a written accounting of the redemption amount, which shall be the sum of the principal amount due to the licensee, interest accrued through the date the licensee took possession of the motor vehicle, and any reasonable expenses incurred to date by the licensee in taking possession of, preparing for sale, and selling the motor vehicle. At any time prior to such sale, the licensee shall permit the borrower to redeem the motor vehicle by tendering cash or other good funds instrument for the principal amount due to the licensee, interest accrued through the date the licensee took possession, and any allowable fees or costs of repossessing and selling the motor vehicle described in subdivision A 5 of § 6.2-2216. Borrowers shall be permitted to recover personal items from repossessed motor vehicles promptly and at no cost.

C. Within 10 days of the licensee's receipt of funds from the sale of a motor vehicle, the borrower is entitled to receive all proceeds from such sale of the motor vehicle in excess of the redemption amount included in the notice described in subsection B, less any additional allowable fees or costs of repossessing and selling the motor vehicle described in subdivision A 5 of § 6.2-2216 that were not included in the redemption amount.

D. Except in the case of fraud or a voluntary surrender of the motor vehicle, a licensee shall not take possession of a motor vehicle until such time as a borrower is in default under the loan agreement. Except as otherwise provided in this chapter, the repossession and sale of a motor vehicle shall be subject to the provisions of Title 8.9A.

E. Notwithstanding any provision to the contrary, but subject to § 6.2-2216, upon default by a borrower, a licensee may seek a personal money judgment against the borrower for any amounts owed under a loan agreement if the borrower impairs the licensee's security interest by (i) intentionally damaging or destroying the motor vehicle, (ii) intentionally concealing the motor vehicle, (iii) giving the licensee a lien in a motor vehicle that is already encumbered by an undisclosed prior lien, or (iv) subsequently giving a security interest in, or selling, a motor vehicle that secures a title loan to a third party, without the licensee's written consent.

2010, c. 477, § 6.1-497; 2020, cc. 1215, 1258.

§ 6.2-2218. Advertising.

A. No person licensed or required to be licensed under this chapter shall use or cause to be published any advertisement that (i) contains any false, misleading, or deceptive statement or representation or (ii) identifies the person by any name other than the name set forth on the license issued by the Commission.

B. Any advertising materials used to promote the price, cost, or interest rate of motor vehicle title loans shall disclose the amount of any minimum monthly payments and a statement of finance charges, expressed as an annual percentage rate, payable using as an example a $1,000 loan that is repaid over a 12-month period. In any print media advertisement, including any web page, used to promote motor vehicle title loans, the disclosure shall be conspicuous. "Conspicuous" shall have the meaning set forth in subdivision (a) (14) of § 59.1-501.2. If a single advertisement consists of multiple pages, folds, or faces, the disclosure requirement applies only to one page, fold, or face. In a television advertisement used to promote motor vehicle title loans, the visual disclosure legend shall include 20 scan lines in size. In a radio advertisement or advertisement communicated by telephone used to promote motor vehicle title loans, the disclosure statement shall last at least two seconds and the statement shall be spoken so that its contents may be easily understood.

2010, c. 477, § 6.1-498.

§ 6.2-2218.1. Other business.

A licensee shall not conduct the business of making motor vehicle title loans under this chapter at any office, suite, room, or place of business where any other business is solicited or conducted except a registered check cashing business, a short-term loan business licensed under Chapter 18 (§ 6.2-1800 et seq.), or such other business as the Commission determines should be permitted, and subject to such conditions as the Commission deems necessary and in the public interest. No such other business shall be allowed except as permitted by Commission regulation or upon the filing of a written application with the Commission, payment of a $300 fee, or other reasonable amount that the Commissioner may set, and provision of such information as the Commission may deem pertinent. The Commission shall not, however, permit the sale of insurance or the enrolling of borrowers under group insurance policies. This section shall not apply to any other business that is transacted solely with persons residing outside the Commonwealth.

2020, cc. 1215, 1258.

§ 6.2-2219. Suspension or revocation of license.

A. The Commission may suspend or revoke any license issued under this chapter upon any of the following grounds:

1. Any ground for denial of a license under this chapter;

2. Any violation of the provisions of this chapter or regulations adopted by the Commission pursuant thereto, or a violation of any other law or regulation applicable to the conduct of the licensee's business;

3. A course of conduct consisting of the failure to perform written agreements with borrowers;

4. Conviction of a felony or misdemeanor involving fraud, misrepresentation, or deceit;

5. Entry of a judgment against the licensee involving fraud, misrepresentation, or deceit;

6. Entry of a federal or state administrative order against the licensee for violation of any law or any regulation applicable to the conduct of his business;

7. Refusal to permit an investigation or examination by the Commission;

8. Failure to pay any fee or assessment imposed by this chapter; or

9. Failure to comply with any order of the Commission.

B. For the purposes of this section, acts of any officer, director, member, partner, trustee, beneficiary, or principal shall be deemed acts of the licensee.

2010, c. 477, § 6.1-499.

§ 6.2-2220. Cease and desist orders.

If the Commission determines that any person has violated any provision of this chapter or any regulation adopted by the Commission pursuant thereto, or violated any other law or regulation applicable to the conduct of a licensee's business, the Commission may, upon 21 days' notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of such person or other address authorized under § 12.1-19.1 and shall state the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the Clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not issue a cease and desist order except based upon findings made at such hearing. Such hearing shall be conducted in accordance with the Commission's Rules of Practice and Procedure. The Commission may enforce compliance with any order issued under this section by imposition and collection of such fines and penalties as may be prescribed by law.

2010, c. 477, § 6.1-500.

§ 6.2-2221. Notice of proposed suspension or revocation.

The Commission shall not revoke or suspend the license of any person licensed under this chapter upon any of the grounds set forth in § 6.2-2219 until it has given the licensee 21 days' notice in writing of the reasons for the proposed revocation or suspension and an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of the licensee or other address authorized under § 12.1-19.1 and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the Clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not suspend or revoke the license except based upon findings made at such hearing. The hearing shall be conducted in accordance with the Commission's Rules of Practice and Procedure.

2010, c. 477, § 6.1-501.

§ 6.2-2222. Fines for violations.

In addition to the authority conferred under §§ 6.2-2219 and 6.2-2220, the Commission may impose a fine or penalty not exceeding $1,000 upon any person who it determines, in proceedings commenced in accordance with the Commission's Rules of Practice and Procedure, has violated any of the provisions of this chapter or regulations promulgated by the Commission pursuant thereto, or violated any other law or regulation applicable to the conduct of a licensee's business. For the purposes of this section, each separate violation shall be subject to the fine or penalty herein prescribed and, in the case of a violation of § 6.2-2201, each loan made or arranged shall constitute a separate violation.

2010, c. 477, § 6.1-502.

§ 6.2-2223. Criminal penalty.

Any person violating § 6.2-2201 shall, upon conviction, be guilty of a Class 1 misdemeanor. For the purposes of this section, each violation shall constitute a separate offense.

2010, c. 477, § 6.1-503.

§ 6.2-2224. Validity of noncompliant loan agreement; private right of action.

A. If any provision of a motor vehicle title loan agreement violates a requirement of this chapter, such provision shall be unenforceable against the borrower.

B. Any person who suffers loss by reason of a violation of any provision of this chapter may bring a civil action to enforce such provision. Any person who is successful in such action shall recover reasonable attorney fees, expert witness fees, and court costs incurred by bringing such action.

2010, c. 477, § 6.1-504; 2020, cc. 1215, 1258.

§ 6.2-2225. Application of chapter to Internet loans.

The provisions of this chapter, including specifically the licensure requirements of § 6.2-2201, shall apply to persons making motor vehicle title loans over the Internet to Virginia residents or any individuals in Virginia, whether or not the person making the loan maintains a physical presence in the Commonwealth.

2010, c. 477, § 6.1-505; 2011, c. 418.

§ 6.2-2226. Authority of Attorney General; referral by Commission to Attorney General.

A. If the Commission determines that a person is in violation of, or has violated, any provision of this chapter, the Commission may refer the information to the Attorney General and may request that the Attorney General investigate such violations. With or without such referral, the Attorney General is hereby authorized to seek to enjoin violations of this chapter. The circuit court having jurisdiction may enjoin such violations notwithstanding the existence of an adequate remedy at law.

B. The Attorney General may also seek, and the circuit court may order or decree, damages and such other relief allowed by law, including restitution to the extent available to borrowers under applicable law. Persons entitled to any relief as authorized by this section shall be identified by order of the court within 180 days from the date of the order permanently enjoining the unlawful act or practice.

C. In any action brought by the Attorney General by virtue of the authority granted in this section, the Attorney General shall be entitled to seek reasonable attorney fees and costs.

2010, c. 477, § 6.1-506; 2020, cc. 1215, 1258.

§ 6.2-2227. Violation of the Virginia Consumer Protection Act.

Any violation of the provisions of this chapter shall constitute a prohibited practice in accordance with § 59.1-200 and shall be subject to any and all of the enforcement provisions of the Virginia Consumer Protection Act (§ 59.1-196 et seq.).

2010, c. 477, § 6.1-507.

Chapter 22.1 - Sales-Based Financing Providers

§ 6.2-2228. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Recipient" means a person whose principal place of business is in the Commonwealth and that applies for sales-based financing and is made a specific offer of sales-based financing by a provider. A recipient may also be an authorized representative of such person. A person acting as a broker cannot be a recipient.

"Sales-based financing" means a transaction that is repaid by the recipient to the provider, over time, as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the volume of sales made or revenue received by the recipient. Sales-based financing also includes a true-up mechanism where the financing is repaid as a fixed payment but provides for a reconciliation process that adjusts the payment to an amount that is a percentage of sales or revenue.

"Sales-based financing broker" or "broker" means a person that, for compensation or the expectation of compensation, obtains or offers to obtain sales-based financing from a provider for a recipient.

"Sales-based financing provider" or "provider" means a person that extends a specific offer of sales-based financing to a recipient. Unless otherwise exempt, "provider" also includes a person that solicits and presents specific offers of sales-based financing under an exclusive contract or arrangement with a provider.

"Specific offer" means the specific terms of sales-based financing, including price or amount, that are quoted to a recipient, based on information obtained from or about the recipient, which, if accepted by a recipient, shall be binding on the provider, as applicable, subject to any specific requirements stated in such terms.

2022, c. 516.

§ 6.2-2229. Exemptions.

The provisions of this chapter shall not apply to and shall not place any additional requirements or obligations upon any of the following:

1. A financial institution;

2. Any person, provider, or broker that enters into no more than five sales-based financing transactions with a recipient in a 12-month period; or

3. A single sales-based financing transaction in an amount over $500,000.

2022, c. 516.

§ 6.2-2230. Registration; authority to transact business.

On or before November 1, 2022, every sales-based financing provider and sales-based financing broker (i) shall register with the Commission in accordance with procedures established by the Commission and (ii) unless such provider or broker is organized under the laws of Virginia or otherwise is not required to obtain authority to transact business in the Commonwealth as a foreign entity, shall obtain authority to transact business in the Commonwealth in accordance with the provisions of Title 13.1.

An application for registration shall include disclosure of any judgment, memorandum of understanding, cease and desist order, or conviction, any of which involve a crime or an act of fraud, breach of trust, or money laundering with respect to that person or any officer, director, manager, operator, or individual who otherwise controls the operations of such provider or broker.

Each sales-based financing provider and sales-based financing broker shall pay an initial registration fee of $1,000 and an annual registration fee of $500 by September 15 every year thereafter. If the provider or broker fails to pay the annual registration fee by September 15, its registrations shall automatically expire by operation of law.

2022, c. 516.

§ 6.2-2231. Disclosure requirements.

Each provider shall provide the following disclosures to a recipient at the time of extending a specific offer of sales-based financing, according to formatting prescribed by the Commission:

1. The total amount of the sales-based financing, and the disbursement amount, if different from the financing amount, after any fees deducted or withheld at disbursement.

2. The finance charge.

3. The total repayment amount, which is the disbursement amount plus the finance charge.

4. The estimated number of payments, which is the number of payments expected, based on the projected sales volume, to equal the total repayment amount.

5. The payment amounts, based on the projected sales volume (i) for payment amounts that are fixed, the payment amounts, frequency, and method or (ii) for payment amounts that are variable, a payment schedule or a description of the method used to calculate the amounts and frequency of payments and payment method.

6. A description of all other potential fees and charges not included in the finance charge, including draw fees, late payment fees, returned payment fees, and prepayment fees or penalties.

7. If the recipient elects to pay off or refinance the sales-based financing prior to full repayment, an updated disclosure of:

a. The information required by subdivisions 1 through 6 as of the day of prepayment or refinance; and

b. A description of prepayment policies including whether the recipient will be required to pay any additional fees, penalties, or other amounts not already included in the finance charge, or if the recipient will receive any discount to the finance charge.

8. A description of collateral requirements or security interests, if any.

9. A statement of whether the provider will pay compensation directly to a broker in connection with the specific offer of sales-based financing and the amount of compensation.

2022, c. 516.

§ 6.2-2232. Recipient place of business; required signature.

A. For the purpose of determining whether a person's principal place of business is in the Commonwealth, a provider or broker may rely upon (i) any written representation by the person as to whether the person's principal place of business is in the Commonwealth, or (ii) the business address provided by the person is in the application for financing.

B. The provider shall obtain the recipient's signature, which may be fulfilled by an electronic signature, on all disclosures required to be presented to the recipient by this chapter at the time the recipient accepts the specific sales-based financing offer.

2022, c. 516.

§ 6.2-2233. Additional information.

Nothing in this chapter shall prevent a provider from providing or disclosing additional information on a sales-based financing being offered to a recipient, provided, however, that such additional information shall not be disclosed as part of the disclosure required by this chapter.

2022, c. 516.

§ 6.2-2234. Place for bringing action under a contract or agreement to provide sales-based financing; certain fees paid by provider; confessions of judgment prohibited.

A. Where a provider enters into a contract or agreement with a recipient to provide sales-based financing, any cause of action arising under such contract or agreement shall be brought in a court in the Commonwealth. Any provision in the contract or agreement mandating that such action be brought outside the Commonwealth shall be unenforceable.

B. Where a contract between a provider or broker and recipient contains an arbitration provision, such contract shall not require face-to-face arbitration proceedings outside the jurisdiction where the recipient's principal place of business is located. If the contract requires face-to-face arbitration proceedings outside such jurisdiction, such provision is unenforceable. The enforceability of the remaining provisions of the arbitration agreement and the method of selecting a forum for the conduct of the arbitration proceedings are as provided in this Code, the United States Arbitration Act (P.L. 68-401), and any applicable rules of arbitration. The provider shall pay any arbitrators' expenses or fees or any other expenses or administrative fees incurred in the conduct of the arbitration proceedings.

C. No sales-based financing contract shall contain any confession by judgment provision or any similar provision. Any such provision in the contract shall be unenforceable.

2022, c. 516.

§ 6.2-2235. Applicability of chapter to internet transactions.

The provisions of this chapter shall apply to providers or brokers offering, obtaining, or making sales-based financing over the internet to or for a recipient, whether or not the provider or broker maintains a physical presence in the Commonwealth.

2022, c. 516.

§ 6.2-2236. Validity of noncompliant sales-based financing.

If any provision of a sales-based financing agreement violates this chapter, such provision shall be unenforceable against the recipient.

2022, c. 516.

§ 6.2-2237. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the rules of the Commission.

2022, c. 516.

§ 6.2-2238. Authority of Attorney General.

A. The Attorney General is authorized to seek to enjoin violations of this chapter. The circuit court having jurisdiction may enjoin such violations notwithstanding the existence of an adequate remedy at law.

B. The Attorney General may also seek, and the circuit court may order or decree, damages and such other relief allowed by law, including restitution to the extent available to borrowers under applicable law. Persons entitled to any relief as authorized by this section shall be identified by order of the court within 180 days from the date of the order permanently enjoining the unlawful act or practice.

C. In any action brought by the Attorney General by virtue of the authority granted in this provision, the Attorney General shall be entitled to seek reasonable attorney fees and costs.

D. If the Attorney General files an action to enjoin violations of this chapter, the Attorney General shall give notice of such action to the Commission.

2022, c. 516.

Subtitle IV - OTHER FINANCIAL ACTIVITIES

Chapter 23 - SAFE DEPOSIT BOXES

§ 6.2-2300. Definitions.

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

"Box" or "safe deposit box" means any safe or box that is available for rent within the vaults of a company.

"Company" means a bank, trust company, or other entity conducting the business of renting safe deposit boxes.

"Lessee" means the person renting a box from a company.

2010, c. 794.

§ 6.2-2301. Access to joint safe deposit box.

When a box is rented from any company transacting business in the Commonwealth under the name of two or more persons with (i) the right of access being given to either or (ii) access to either the survivor or survivors of such persons, any one or more of such persons, whether the other or others be living or not shall have the right of access to the box and may remove therefrom its contents. In the case of such a removal, the company shall be exempt from any liability for permitting such person access thereto.

Code 1950, § 6-264; 1966, c. 584, § 6.1-332; 2010, c. 794.

§ 6.2-2302. Limited access to safe deposit box upon death of lessee.

A. Upon (i) the death of the sole lessee of a box or (ii) the death of a lessee of a box rented under the name of two or more persons upon proof satisfactory to the company that no then co-lessee is reasonably available for access to the box, the company may permit limited access to the box by the spouse or next of kin of the deceased lessee, a court clerk, or other interested person for the limited purpose of looking for a will or other testamentary instruments.

B. The company may require proof of death as it deems necessary prior to permitting access to a box.

C. Access to a box shall be under the supervision of a designated officer or employee of the company, and nothing shall be removed from the box except the will or testamentary instrument for transmission to the appropriate clerk.

D. The company shall (i) make a photocopy of any document removed from a box pursuant to this section, (ii) place the copy in the box prior to delivering the original to any person, and (iii) not be liable except for acting in bad faith or for permitting the removal from the safe deposit box of items other than the will or other testamentary instrument of the deceased lessee.

1984, c. 446, § 6.1-332.1; 2002, c. 312; 2003, c. 269; 2010, c. 794.

§ 6.2-2303. Limited access to safe deposit box upon incapacity of lessee.

A. Upon receiving a letter from a licensed physician that in his professional opinion an individual, who is the sole lessee of a box, is incapable of receiving and evaluating information effectively or responding to people, events, or environments to such an extent that the individual lacks the capacity:

1. To manage property or financial affairs or provide for his support or for the support of his legal dependents without the assistance or protection of another, the company may permit access to such box for the limited purpose of looking for a power of attorney executed by the lessee that relates to the management of his property or financial affairs; or

2. To meet the essential requirements for his health, care, safety, or therapeutic needs without the assistance or protection of another, the company may permit access to the box for the limited purpose of looking for an advance medical directive executed by the lessee.

B. Such access shall only be granted to the lessee's guardian, conservator, spouse or next of kin or to a person asserting a knowledge or belief:

1. If the access is sought pursuant to subdivision A 1, that he is named as an agent in a power of attorney believed to be in the box; or

2. If the access is sought pursuant to subdivision A 2, that he is named as an agent in an advance medical directive believed to be in the box.

C. Access to a box shall be under the supervision of a designated officer or employee of the company, and nothing shall be removed from the box except (i) if the access is sought pursuant to subdivision A 1, the power of attorney for transmission to a person named as agent therein or (ii) if the access is sought pursuant to subdivision A 2, the advance medical directive for transmission to a person named as agent therein or in the absence of such a person, to the lessee's attending physician to be made a part of the lessee's medical records.

D. If the box is co-leased, the company may permit entry into the box by the same persons and under the same circumstances and terms as specified above, upon proof satisfactory to it that the then co-lessees are not reasonably available for access to the box.

E. The company shall (i) make a photocopy of any document removed from a box pursuant to this section, (ii) place the copy in the box prior to delivering the original to any person, and (iii) not be liable except for acting in bad faith or for permitting the removal of other items from the box.

1984, c. 446, § 6.1-332.1; 2002, c. 312; 2003, c. 269; 2010, c. 794.

§ 6.2-2304. Duty to deny access to safe deposit boxes under certain conditions.

A. As used in this section, unless the context requires otherwise:

"Creditor" means (i) a judgment creditor, (ii) a plaintiff who has obtained a pre-judgment attachment order, or (iii) an appropriate federal or state tax official.

"Defendant" means the lessee of a box who is named as defendant, judgment debtor, or taxpayer in a notice of proceeding.

"Notice of proceeding" means a notice of (i) lien of fieri facias, (ii) other process under §§ 8.01-474, 8.01-478, 8.01-479, 8.01-501 through 8.01-504, and § 58.1-1804, 58.1-2020, or 58.1-3952, (iii) levy for federal taxes, or (iv) attachment that states the office of the company where a box rented by the defendant is located.

B. If a company is served with a notice of proceeding with respect to a box, the company shall deny the defendant access to the box leased in the name of the defendant unless otherwise directed by an appropriate court or the judgment creditor.

C. If the notice of proceeding names less than all of the co-lessees of a box and:

1. If the rental contract so provides, the company may deny all co-lessees access to the box, unless otherwise directed by an appropriate court or the judgment creditor. The company may allow access to such co-lessee if in so doing the company complies with the requirements of subdivision 2 as if the rental contract did not provide for denial of access to co-lessees not named in the notice of proceeding; and

2. If the rental contract does not provide for denial of access to co-lessees not named in the notice of proceeding, the company shall not deny access to any co-lessee not named in the notice of proceeding if the co-lessee (i) is given notice by the company that if the co-lessee knowingly removes from the box any property subject to the notice of proceeding, the co-lessee shall be deemed guilty of larceny, (ii) is given a copy of the notice of proceeding, and (iii) signs and delivers to the company a written acknowledgment of receipt of such notices.

Code 1950, § 6-264.1; 1956, c. 82; 1966, c. 584, § 6.1-333; 1968, c. 574; 1992, c. 17; 2010, c. 794.

§ 6.2-2305. Notice to lessee upon nonpayment of rent.

Whenever any amount due for the use of any box of any company shall remain unpaid for a period of one year, the company may, at the expiration of such period, send to the lessee of the box a notice in writing by registered or certified mail, postage prepaid, at his last known post-office address, notifying the lessee that if the amount due for the rental of the box is not paid within 60 days from the date of sending the notice, the company will cause the box to be opened and the contents thereof to be inventoried, sealed, and placed in one of the general safes or boxes of the company.

Code 1950, § 6-263; 1966, c. 584, § 6.1-331; 1993, c. 62; 1997, c. 129; 2010, c. 794.

§ 6.2-2306. Opening box; marking contents.

Upon the expiration of 60 days from the date of mailing the notice required by § 6.2-2305 and the failure within such period of the lessee of the box according to the records of the company to pay the amount due for the rental thereof, together with any charges for which the rental agreement provides, the company may, in the presence of two company employees, one of whom shall be a notary public, cause the box to be opened and the contents thereof, if any, to be removed, inventoried, and sealed up by the notary public in a package. The notary public shall distinctly mark upon the package the name of the lessee of the box according to the records of the company and the date of removal of the property.

Code 1950, § 6-265; 1966, c. 584, § 6.1-334; 2003, c. 437; 2010, c. 794.

§ 6.2-2307. Disposition of contents.

When a package has been marked for identification by a notary public as required under the provisions of § 6.2-2306, it shall, in the presence of an officer of the company, be placed by the notary public in one of the general safes or boxes of the company. The lessee shall be liable to the company for storage of the package at a rental rate that does not exceed the original rental of the box that was opened. The package shall remain in such general safe or box for a period of not less than two years, unless sooner removed by the lessee.

Code 1950, § 6-266; 1966, c. 584, § 6.1-335; 2010, c. 794.

§ 6.2-2308. Certificate of notary public.

A. The notary public who placed a package in one of the general safes or boxes of the company as required under the provisions of § 6.2-2307 shall, upon doing so, file with the company a certificate, under seal, which shall set out the date of the opening of such box, the name of the lessee of the box, and a list of the contents, if any. The certificate shall be sworn to by the notary public and shall be prima facie evidence of the facts therein set forth in all legal proceedings wherein evidence of such facts would be admissible.

B. The company shall mail a copy of such certificate within 10 days after its filing, to the lessee of the box at his last known post-office address, by registered or certified mail, return receipt requested. The company shall include in its mailing of the copy of the certificate a notice that the contents will be kept, at the expense of the lessee, in a general safe or box in the vaults of the company for a period of not less than two years, unless sooner removed by the lessee.

Code 1950, § 6-267; 1966, c. 584, § 6.1-336; 1997, c. 129; 2010, c. 794.

§ 6.2-2309. Subsequent right of lessee to contents.

At any time after the mailing of the notice as required by § 6.2-2308 and before the expiration of two years, the lessee may require the delivery of the contents of the box as shown by the certificate, upon payment of all rentals due at the time of opening the box, the cost of opening the box, the fees of the notary public for issuing his certificate thereon, and all charges accrued during the period the contents remained in the general safe or box of the company, together with any charges for which the rental agreement provides.

Code 1950, § 6-268; 1966, c. 584, § 6.1-337; 2010, c. 794.

§ 6.2-2310. Sale of contents after two years.

A. After the expiration of two years from the time of mailing the certificate provided for in § 6.2-2308, if the lessee has not obtained delivery of the contents, the company shall:

1. Mail in a securely closed envelope, by registered or certified mail, return receipt requested, addressed to the lessee at his last known post-office address, a notice stating that two years have elapsed since the opening of the box and the mailing of the certificate, and that the company will sell all the property or articles of value set out in the certificate at a time and place stated in the notice, which time shall be not less than 60 days after the date of mailing such notice. The notice shall also state the amount due for rental, up to the time of opening the box, the cost of opening the box, and the further cost of safekeeping of its contents for the period since the opening of the safe or box; and

2. Publish twice a notice of the time and place of the sale, not more than 20 days prior to the sale, in a newspaper published in the locality where the sale will be held. If there is no newspaper published in the locality, then in a newspaper published in the locality nearest thereto having a newspaper.

B. Unless the lessee pays, on or before the day stated in the notice, all such sums, and all the charges accruing to the time of payment, together with any charges for which the rental agreement provides, the company may sell all the property or articles of value set out in such certificate for cash, at public auction, at the time and place stated in such notice.

Code 1950, § 6-269; 1966, c. 584, § 6.1-338; 1997, c. 129; 2010, c. 794.

§ 6.2-2311. Disposition of proceeds of sale.

From the proceeds of any sale held pursuant to the provisions of § 6.2-2310, the company shall deduct all its charges, as stated in such notice, together with any further charges that shall have accrued since the mailing thereof, including reasonable expenses for notices, advertising and sale, together with any charges for which the rental agreement provides. The balance, if any, of such proceeds shall be deposited to the credit of the lessee and shall be paid to the lessee or his assignee or legal representative, on demand and upon production of satisfactory evidence of identity. The company shall be liable to the lessee for interest on any balance so deposited at the annual rate of three percent.

Code 1950, § 6-270; 1966, c. 584, § 6.1-339; 2010, c. 794.

§ 6.2-2312. Rental for storage unpaid for three years.

If a company has received for safekeeping from any person any package or box to be stored in its general vault, and the rental for such storage shall have remained unpaid for a period of three years, the company shall have the right to open such package or box and to have the contents thereof inventoried, upon compliance substantially with the procedure as to witnesses, notices, and certificates provided for the opening of any box in §§ 6.2-2305 through 6.2-2308. If the rental or other charges for the safekeeping of such package or box and the charges incident to the opening of the same remain unpaid for a period of two years from the date of such opening, the contents thereof may be sold upon compliance substantially with the procedure provided for the sale of the contents of any box in § 6.2-2310, and the proceeds of such sale shall be treated in the same manner provided for the treatment of the proceeds of sale of the contents of any box in § 6.2-2311.

Code 1950, § 6-273; 1966, c. 584, § 6.1-342; 2010, c. 794.

§ 6.2-2313. Documents having pretium affectionis.

Whenever the contents of any box opened under the provisions of this chapter shall consist either wholly or in part of documents, letters, or other papers of a private nature, or articles having a pretium affectionis, such documents, letters, papers, or articles shall not be sold, but shall be retained by the company, without liability.

Code 1950, § 6-271; 1966, c. 584, § 6.1-340; 2010, c. 794.

§ 6.2-2314. Provisions confer cumulative remedy.

The provisions of this chapter shall not (i) preclude any other remedy existing for the enforcement of the claims of a company against the person in whose name the box is rented, nor (ii) bar the right of the company to recover the unpaid portion of the debt from the proceeds of the sale of the property deposited with it.

Code 1950, § 6-272; 1966, c. 584, § 6.1-341; 2010, c. 794.

Chapter 24 - SECURITIZATION TRANSACTIONS

§ 6.2-2400. Definition.

As used in this chapter:

"Securitization transaction" means a transaction relating to the issuance or transfer by a special purpose entity of beneficial interests or undivided interests, which entitle their holders to receive payments or other distributions that depend primarily on the cash flow from assets, including financial assets and other credit exposures, in which that special purpose entity has rights or the power to transfer rights.

2004, c. 600, § 6.1-473; 2010, c. 794.

§ 6.2-2401. Securitization transactions; no interest retained by transferor.

Notwithstanding any other provision of law, including § 8.9A-623, to the extent set forth in the transaction documents relating to a securitization transaction:

1. Any property, assets, or rights purported to be transferred, in whole or in part, in the securitization transaction shall be deemed to no longer be the property, assets, or rights of the transferor;

2. A transferor in the securitization transaction, its creditors or, in any insolvency proceeding with respect to the transferor or the transferor's property, a bankruptcy trustee, receiver, debtor, debtor in possession, or similar person, to the extent the issue is governed by the laws of the Commonwealth, shall have no rights, legal or equitable, whatsoever to reacquire, reclaim, recover, repudiate, disaffirm, redeem, or recharacterize as property of the transferor any property, assets, or rights purported to be transferred, in whole or in part, by the transferor; and

3. In the event of a bankruptcy, receivership, or other insolvency proceeding with respect to the transferor or the transferor's property, to the extent the issue is governed by the laws of the Commonwealth, such property, assets, and rights shall not be deemed to be part of the transferor's property, assets, rights, or estate.

2004, c. 600, § 6.1-473; 2010, c. 794.

§ 6.2-2402. Treatment of securitization transactions.

Nothing contained in this chapter shall:

1. Be deemed to require any securitization transaction to be treated as a sale for federal or state tax purposes or to preclude the treatment of any securitization transaction as debt for federal or state tax purposes or to change any applicable laws relating to the perfection and priority of security or ownership interests of persons other than the transferor, hypothetical lien creditor or, in the event of a bankruptcy, receivership or other insolvency proceeding with respect to the transferor or its property, a bankruptcy trustee, receiver, debtor, debtor in possession, or similar person; or

2. Change the tax treatment of securitization transactions that take place pursuant to this chapter.

2004, c. 600, § 6.1-473; 2010, c. 794.

Chapter 25 - REFUND ANTICIPATION LOANS

§ 6.2-2500. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Applicant" means a customer who applies for a refund anticipation loan through a facilitator.

"Borrower" means an applicant who receives a refund anticipation loan through a facilitator.

"Customer" means an individual for whom tax preparation services are performed.

"Facilitator" means a person who receives or accepts for delivery an application for a refund anticipation loan, delivers a check in payment of refund anticipation loan proceeds, or in any other manner acts to allow the making of a refund anticipation loan. "Facilitator" does not include a bank, thrift, savings association, industrial bank, or credit union, operating under the laws of the United States or the Commonwealth, an affiliate that is a servicer for such an entity, or any person who acts solely as an intermediary and does not deal with an applicant in the making of the refund anticipation loan.

"Refund anticipation loan" means a loan, whether provided through a facilitator or by another entity such as a financial institution, in anticipation of, and whose payment is secured by, a customer's federal or state income tax refund or by both.

"Refund anticipation loan fee" means any fee, charge, or other consideration imposed by a lender or a facilitator for a refund anticipation loan. The term does not include any fee, charge, or other consideration usually imposed by a facilitator in the ordinary course of business for nonloan services, such as fees for preparing tax returns and fees for the electronic filing of tax returns.

"Refund anticipation loan fee schedule" means a list or table of refund anticipation loan fees that (i) includes three or more representative refund anticipation loan amounts; (ii) lists separately each fee or charge imposed, as well as a total of all fees imposed, related to the making of a refund anticipation loan; and (iii) includes, for each representative loan amount, the estimated annual percentage rate calculated under the guidelines established by the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.).

"Tax return" means a return, declaration, statement, refund claim, or other document required to be made or filed in connection with state or federal income taxes.

2006, c. 399, § 6.1-474; 2010, c. 794.

§ 6.2-2501. Advertising; posting refund anticipation loan fee schedules; and disclosures.

A. Any facilitator who advertises the availability of a refund anticipation loan shall not directly or indirectly represent the loan as a customer's actual refund. Any advertisement that mentions a refund anticipation loan shall state conspicuously that it is a loan and that a fee or interest will be charged by the lending institution. The advertisement shall also disclose the name of the lending institution.

B. Every facilitator who offers to facilitate, or who facilitates, a refund anticipation loan to a customer shall post a refund anticipation loan fee schedule showing the current fees for refund anticipation loans facilitated at the office, for the electronic filing of a customer's tax return, for setting up a refund account, and any other related activities necessary to receive a refund anticipation loan. The refund anticipation loan fee schedule also shall include a statement indicating that a customer may have the tax return filed electronically without also obtaining a refund anticipation loan.

C. The refund anticipation loan fee schedule required by subsection B shall be made in not less than 28-point type on a document measuring not less than 16 inches by 20 inches. The postings required in this section shall be displayed in a prominent location at each office where any facilitator is offering to facilitate or is facilitating a refund anticipation loan.

D. Prior to an applicant completing a refund anticipation loan application, a facilitator that offers to facilitate a refund anticipation loan shall provide to the applicant a disclosure clearly setting forth the following:

1. The refund anticipation loan fee schedule;

2. That a refund anticipation loan is a loan and is not the applicant's actual income tax refund;

3. That a customer can file an income tax return electronically without applying for a refund anticipation loan;

4. The average amount of time, according to the Internal Revenue Service, within which a customer who does not obtain a refund anticipation loan can expect to receive a refund if a customer's return is filed or mailed as follows:

a. Filed electronically and the refund is deposited directly into a customer's bank account or mailed to a customer; and

b. Mailed to the Internal Revenue Service and the refund is deposited directly into a customer's bank account or mailed to a customer;

5. That the Internal Revenue Service does not guarantee that it will pay the full amount of the anticipated refund and it does not guarantee a specific date that a refund will be deposited into a customer's bank account or mailed to a customer;

6. That the borrower is responsible for the repayment of the refund anticipation loan and the related fees in the event that the tax refund is not paid or not paid in full;

7. The estimated time within which the loan proceeds will be disbursed to the borrower if the loan is approved; and

8. The fee that will be charged, if any, if the applicant's loan is not approved.

E. Prior to consummating a refund anticipation loan transaction, a facilitator shall provide to the applicant, in either written or electronic form, the following:

1. The estimated total fees for obtaining the refund anticipation loan;

2. The estimated annual percentage rate for the applicant's refund anticipation loan, using the guidelines established under the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.); and

3. The various costs, fees, and finance charges, if applicable, associated with receiving a refund by mail or by direct deposit directly from the Internal Revenue Service, a refund anticipation loan, a refund anticipation check, or any other refund settlement options facilitated by the facilitator.

F. When an application involves more than one applicant, a disclosure pursuant to this section need only be given to one of the applicants applying for the refund anticipation loan.

2006, c. 399, §§ 6.1-475, 6.1-476; 2010, c. 794.

§ 6.2-2502. Prohibited activities.

Any facilitator who offers to facilitate, or who facilitates, a refund anticipation loan shall not:

1. Require a customer to enter into a loan arrangement in order to complete a tax return;

2. Misrepresent a material factor or condition of a refund anticipation loan;

3. Fail to process the application for a refund anticipation loan promptly after an applicant applies for the loan; or

4. Engage in any transaction, practice, or course of business that operates a fraud upon any person in connection with a refund anticipation loan.

2006, c. 399, § 6.1-476; 2010, c. 794.

§ 6.2-2503. Right of rescission.

A borrower who obtains a refund anticipation loan may rescind the loan, on or before the close of business on the next day of business, by either returning the original check issued for the loan or providing the amount of the loan in cash to the lender or the facilitator. The facilitator may not charge the borrower a fee for rescinding the loan or a refund anticipation loan fee if the loan is rescinded but may charge the customer a fee for establishing and administering a bank account to electronically receive and distribute the refund.

2006, c. 399, § 6.1-477; 2010, c. 794.

§ 6.2-2504. Preemption of local laws.

This chapter shall preempt and be exclusive of all ordinances of any locality relating to refund anticipation loans. This section shall be given retroactive and prospective effect.

2006, c. 399, § 6.1-478; 2010, c. 794.

§ 6.2-2505. Violations; enforcement.

Any violation of the provisions of this chapter shall constitute a prohibited practice under the provisions of § 59.1-200 and shall be subject to any and all of the enforcement provisions of the Virginia Consumer Protection Act (§ 59.1-196 et seq.).

2006, c. 399, § 6.1-479; 2010, c. 794.

Chapter 26 - Qualified Education Loan Servicers

§ 6.2-2600. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Licensee" means a person to whom a license has been issued under this chapter.

"Nationwide Multistate Licensing System and Registry" or "Registry" means the nationwide multistate licensing system and registry created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.

"Principal" means any person who, directly or indirectly, owns or controls (i) 10 percent or more of the outstanding stock of a stock corporation or (ii) a 10 percent or greater interest in any other type of entity.

"Qualified education loan" means any loan primarily used to finance a postsecondary education and costs of attendance at a postsecondary public or private educational institution, including tuition, fees, books and supplies, room and board, transportation, and miscellaneous personal expenses. "Qualified education loan" includes a loan made to refinance a qualified education loan. "Qualified education loan" does not include an extension of credit under an open-end credit plan, a reverse mortgage transaction, a residential mortgage transaction, or any other loan that is secured by real property or a dwelling.

"Qualified education loan borrower" or "borrower" means (i) any current resident of the Commonwealth who has received or agreed to pay a qualified education loan or (ii) any person who is contractually obligated with such resident for repaying the qualified education loan.

"Qualified education loan servicer" or "loan servicer" means any person, wherever located, that:

1. (i) Receives any scheduled periodic payments from a qualified education loan borrower or notification of such payments or (ii) applies payments to the qualified education loan borrower's account pursuant to the terms of the qualified education loan or the contract governing the servicing;

2. During a period when no payment is required on a qualified education loan, (i) maintains account records for the qualified education loan and (ii) communicates with the qualified education loan borrower regarding the qualified education loan, on behalf of the qualified education loan's holder; and

3. Interacts with a qualified education loan borrower, which includes conducting activities to help prevent default on obligations arising from qualified education loans or to facilitate any activity described in clause (i) or (ii) of subdivision 1.

"Servicing" means:

1. (i) Receiving any scheduled periodic payments from a qualified education loan borrower or notification of such payments or (ii) applying the payments of principal and interest and such other payments, with respect to the amounts received from a qualified education loan borrower, as may be required pursuant to the terms of a qualified education loan;

2. During a period when no payment is required on a qualified education loan, (i) maintaining account records for the loan and (ii) communicating with the qualified education loan borrower regarding the qualified education loan, on behalf of the qualified education loan's holder; and

3. Interacting with a qualified education loan borrower, including conducting activities to help prevent default on obligations arising from qualified education loans or to facilitate any activity described in clause (i) or (ii) of subdivision 1.

2020, cc. 1198, 1250; 2022, cc. 370, 371.

§ 6.2-2601. License requirement; exceptions.

A. No person shall act as a qualified education loan servicer, directly or indirectly, whether or not the person has an office or any other physical presence in the Commonwealth, except in accordance with the provisions of this chapter and without having first obtained a license under this chapter from the Commission.

B. Every qualified education loan servicer required to be licensed under this chapter shall register with the Registry and be subject to such registration and renewal requirements as may be established by the Registry, in addition to any requirements of this chapter. In adopting regulations pursuant to § 6.2-2622, the Commission shall include any terms, conditions, or requirements applicable to such registration and renewal. Any fees required by the Registry shall be separate and apart from any fees imposed by this chapter. The Commission, at its discretion, may collect any registration and renewal fees on behalf of the Registry and remit such fees to the Registry or permit the Registry to collect any fees imposed by this chapter and remit such fees to the Commission.

C. In connection with its implementation and administration of this chapter, the Commission may establish agreements or contracts with the Registry or other entities designated by the Registry to collect, distribute, and maintain information and records, and process fees, related to qualified education loan servicers required to be licensed under this chapter. In establishing such agreements or contracts, the Commission shall not be subject to the Virginia Public Procurement Act (§ 2.2-4300 et seq.).

D. The provisions of this chapter shall not apply to:

1. Any bank, savings institution, credit union, or financial institution subject to regulation under 12 U.S.C. § 2002;

2. Any wholly owned subsidiary of any bank, savings institution, or credit union, provided that such wholly owned subsidiary is subject to the general supervision or regulation of, or subject to audit or examination by, a regulatory body or agency of the United States or any state; or

3. Any public or private nonprofit institution of higher education.

2020, cc. 1198, 1250.

§ 6.2-2602. Licensure of qualified education loan servicers; automatic issuance of license for federal student loan servicing contractors.

A. A person seeking to act as a qualified education loan servicer is exempt from the application procedures described in subsections A and B of § 6.2-2603 upon determination by the Commissioner that the person (i) has an agreement with the U.S. Secretary of Education under 20 U.S.C. § 1078(b), solely to the extent of the person's actions as a guarantor that engages in averting defaults, or (ii) is a party to a contract awarded by the U.S. Secretary of Education under 20 U.S.C. § 1087f. The Commissioner shall prescribe the procedure to document eligibility for this exemption.

B. With regard to a person exempted from the application procedures described in subsections A and B of § 6.2-2603 pursuant to subsection A, the Commissioner shall:

1. Automatically issue a license upon payment of the fee required by subsection C of § 6.2-2603 and the providing of the bond required by § 6.2-2604;

2. Automatically renew a license upon payment of the fees required by subsection E of § 6.2-2607; and

3. Deem the person to have met all the requirements set forth in subsections A and B of § 6.2-2603.

C. A person issued a license pursuant to subdivision B 1:

1. Is exempt from subsections A and B of § 6.2-2603; and

2. Shall comply with the record requirements in § 6.2-2608 except to the extent that the requirements are inconsistent with federal law.

D. A person issued a license pursuant to subdivision B 1 shall, within seven days after receiving notification of the expiration, revocation, or termination of (i) an agreement with the U.S. Secretary of Education under 20 U.S.C. § 1078(b) or (ii) any contract awarded by the U.S. Secretary of Education under 20 U.S.C. § 1087f, provide the Commissioner with written notice of such expiration, revocation, or termination. Notwithstanding any other provision of this chapter, such person's license shall automatically expire 30 days after the expiration, revocation, or termination of such person's contract. A person seeking to act as a qualified education loan servicer following the expiration of its license may apply for a new license by filing an application that meets the requirements of §§ 6.2-2603 and 6.2-2604 and subsection B of § 6.2-2605.

E. With respect to qualified education loan servicing not conducted pursuant to (i) an agreement with the U.S. Secretary of Education under 20 U.S.C. § 1078(b) or (ii) a contract awarded by the U.S. Secretary of Education under 20 U.S.C. § 1087f, nothing in this section prevents the Commission from issuing an order to temporarily or permanently prohibit or bar any person from acting as a qualified education loan servicer or violating applicable law.

F. In the case of qualified education loan servicing conducted pursuant to (i) an agreement with the U.S. Secretary of Education under 20 U.S.C. § 1078(b) or (ii) a contract awarded by the U.S. Secretary of Education under 20 U.S.C. § 1087f, nothing in this section shall prevent the Commission from issuing a cease and desist order or injunction against any qualified education loan servicer to cease activities in violation of this act.

2020, cc. 1198, 1250.

§ 6.2-2603. Application for license; form; content; fee.

A. An application for a license under this chapter shall be made in writing and on a form provided by the Commission.

B. The application shall set forth:

1. The name and address of the applicant, the name and address of each senior officer, and (i) if the applicant is a partnership, firm, or association, the name and address of each partner or member; (ii) if the applicant is a corporation or limited liability company, the name and address of each director, member, registered agent, and principal; or (iii) if the applicant is a business trust, the name and address of each trustee;

2. The address of the principal place of business to be licensed;

3. Such other information concerning the financial responsibility, background, experience, and general fitness of the applicant and its members, senior officers, directors, trustees, and principals as the Commissioner may require; and

4. Any other pertinent information that the Commissioner may require.

C. The application shall be accompanied by payment of a nonrefundable application fee as prescribed by the Commission. The fee shall not be abated by surrender, suspension, or revocation of the license.

D. If the Commissioner requests information to complete a deficient application and the information is not received within 60 days of the Commissioner's request, the application shall be deemed abandoned unless a request for an extension of time is received and approved by the Commissioner prior to the expiration of the 60-day period. However, this subsection shall not be construed to prohibit the Commission from denying a license application that does not meet the requirements of this chapter.

2020, cc. 1198, 1250.

§ 6.2-2604. Bond required.

The application for a license shall be accompanied by a bond filed with the Commissioner with corporate surety authorized to execute such bond, in the principal amount as determined by the Commissioner. The amount of the bond shall be not less than $50,000 nor more than $500,000. The form of such bond shall be approved by the Commissioner. Such bond shall be continuously maintained thereafter in full force. Such bond shall be conditioned upon the applicant or licensee performing all written agreements pertaining to qualified education loans, correctly and accurately accounting for all funds received by the applicant or licensee in connection with qualified education loans, and conducting its business in conformity with this chapter and all applicable laws. The aggregate liability under the bond shall not exceed the penal sum of the bond.

2020, cc. 1198, 1250.

§ 6.2-2605. Investigation of applications.

A. The Commissioner may make such investigations as he deems necessary to determine if the applicant has complied with all applicable provisions of law and regulations.

B. For the purpose of investigating individuals who are members, senior officers, directors, trustees, and principals of an applicant, such persons shall consent to a criminal history records check and submit to fingerprinting. Each member, senior officer, director, trustee, and principal shall pay for the cost of such fingerprinting and criminal history records check. Such persons shall cause their fingerprints, personal descriptive information, and records check fees to be submitted to either of the following, as prescribed by the Commissioner:

1. The Bureau, which shall forward these items to the Central Criminal Records Exchange. The Central Criminal Records Exchange shall (i) conduct a search of its own criminal history records and forward such individuals' fingerprints and personal descriptive information to the Federal Bureau of Investigation for the purpose of obtaining national criminal history record information regarding such individuals and (ii) forward the results of the state and national records searches to the Commissioner or his designee, who shall be an employee of the Commission; or

2. The Registry, provided that it is capable of processing criminal history records checks.

C. If any member, senior officer, director, trustee, or principal of an applicant fails to cause his fingerprints, personal descriptive information, or records check fees to be submitted in accordance with subsection B, the application for a qualified education loan servicer license shall be denied.

2020, cc. 1198, 1250.

§ 6.2-2606. Qualifications.

A. Upon the filing and investigation of an application for a license, compliance by the applicant with the provisions of §§ 6.2-2603 and 6.2-2604, and compliance by the persons identified in subsection B of § 6.2-2605 with the provisions contained therein, the Commission shall issue and deliver to the applicant the license applied for to engage in business under this chapter at the location specified in the application if it finds that:

1. The financial responsibility, character, experience, and general fitness of the applicant and its members, senior officers, directors, trustees, and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with the law;

2. The application does not contain any false statement of a material fact; and

3. The application does not omit any statement of a material fact that is required by § 6.2-2603.

B. If the Commission fails to make such findings, no license shall be issued and the Commissioner shall notify the applicant of the denial and the reasons for such denial.

2020, cc. 1198, 1250.

§ 6.2-2607. Licenses; place of business; changes; renewal.

A. Each license shall state the address at which the principal place of business is to be conducted and shall state fully the legal name of the licensee as well as any fictitious names by which the licensee is conducting business under this chapter. Licenses shall not be transferable or assignable, by operation of law or otherwise. No licensee shall use any names other than the legal name or fictitious names set forth on the license issued by the Commission.

B. Every licensee shall notify the Commissioner, in writing, at least 30 days prior to relocating its principal place of business and confirm the change in writing within five days after such relocation.

C. Every licensee shall within 10 days notify the Commissioner, in writing, of (i) any change to its legal name; (ii) any change to or additional fictitious name by which the licensee is conducting business under this chapter; and (iii) the name, address, and position of each new member, senior officer, director, trustee, and principal. At the direction of the Commissioner, any such individual shall be treated as a member, senior officer, director, trustee, or principal of an applicant for the purpose of being investigated pursuant to subsection B of § 6.2-2605. The licensee shall provide such other information with respect to the changes and persons identified in this subsection as the Commissioner may reasonably require.

D. Every license shall remain in force until it expires or has been surrendered, revoked, or suspended. The expiration, surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of such licensee.

E. Notwithstanding any other provision of this chapter, a qualified education loan servicer license shall expire at the end of each calendar year unless it is renewed by a licensee prior to the expiration date. A licensee may renew its license by (i) requesting renewal through the Registry and (ii) complying with any requirements associated with such renewal request that are imposed by the Registry. If a qualified education loan servicer license has expired, the Commission may by regulation permit the former licensee to seek license reinstatement after the license expiration date by renewing its license in accordance with this subsection and paying a reinstatement fee as prescribed by the Commission.

2020, cc. 1198, 1250.

§ 6.2-2608. Retention of records; responding to the Bureau.

A. Each licensee shall maintain in its principal place of business such books, accounts, and records as the Commissioner may reasonably require in order to determine whether such person is complying with the provisions of this chapter and other laws applicable to the conduct of its business. Such books, accounts, and records shall be maintained apart and separate from any other business in which the qualified education loan servicer is involved. Each licensee shall maintain adequate records of each qualified education loan transaction for at least three years after final payment is made on such loan or the assignment of such qualified education loan, whichever occurs first.

B. To safeguard the privacy of qualified education loan borrowers, records containing personal financial information shall be shredded, incinerated, or otherwise disposed of by a licensee in a secure manner. Licensees may arrange for the shredding, incineration, or other disposal of the records from a business record destruction vendor.

C. When the Bureau requests a written response, books, records, documentation, or other information from a licensee in connection with the Bureau's investigation, enforcement, or examination of compliance with applicable laws, the licensee shall deliver a written response as well as any requested books, records, documentation, or information within the time period specified in the Bureau's request. If no time period is specified, a written response as well as any requested books, records, documentation, or information shall be delivered by the licensee to the Bureau not later than 30 days from the date of such request. In determining the specified time period for responding to the Bureau and when considering a request for an extension of time to respond, the Bureau shall take into consideration the volume and complexity of the requested written response, books, records, documentation, or information and such other factors as the Bureau determines to be relevant under the circumstances.

2020, cc. 1198, 1250.

§ 6.2-2609. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire, directly or indirectly, 25 percent or more of the voting shares of a corporation or 25 percent or more of the ownership of any other person licensed to conduct business under this chapter unless such person first:

1. Files an application with the Commission in such form as the Commissioner may prescribe from time to time;

2. Delivers such other information to the Commissioner as the Commissioner may require concerning the financial responsibility, background, experience, and general fitness of the applicant and of any proposed new directors, senior officers, principals, trustees, or members of the licensee;

3. Submits and furnishes to the Commissioner information concerning the identity of the applicant and of any proposed new directors, senior officers, principals, trustees, or members of the licensee. Such individuals shall (i) consent to a criminal history records check, submit to fingerprinting, and pay for the cost of such fingerprinting and criminal records check and (ii) cause their fingerprints, personal descriptive information, and records check fees to be submitted to either of the following, as prescribed by the Commissioner:

a. The Bureau, who shall forward these items to the Central Criminal Records Exchange. The Central Criminal Records Exchange shall (i) conduct searches of its own criminal history records and forward such individuals' fingerprints and personal descriptive information to the Federal Bureau of Investigation for the purpose of obtaining national criminal history record information regarding such individuals and (ii) forward the results of the state and national records search to the Commissioner or his designee, who shall be an employee of the Commission; or

b. The Registry, provided that it is capable of processing criminal history records checks; and

4. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant and any proposed new directors, members, senior officers, trustees, and principals of the licensee have the financial responsibility, character, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by order of the Commissioner giving the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

C. The provisions of this section shall not apply to the acquisition of an interest in a licensee (i) directly or indirectly, including an acquisition by merger or consolidation, by or with a person licensed or exempt from licensing under this chapter; (ii) directly or indirectly, by merger or consolidation by or with a person affiliated through common ownership with the licensee; or (iii) by bequest, descent, survivorship, or operation of law. This section shall also not apply to the acquisition of an interest in a licensee that (i) an agreement with the U.S. Secretary of Education under 20 U.S.C. § 1078(b) or (ii) is a party to a contract awarded by the U.S. Secretary of Education under 20 U.S.C. § 1087f. The person acquiring an interest in a licensee in a transaction that is exempt from filing an application by this subsection shall send written notice of such acquisition to the Commissioner within 30 days of its closing.

2020, cc. 1198, 1250.

§ 6.2-2610. Prohibited activities; compliance with federal laws and regulations.

A. No qualified education loan servicer shall:

1. Directly or indirectly employ any scheme, device, or artifice to defraud or mislead qualified education loan borrowers;

2. Engage in any unfair or deceptive act or practice toward any person or misrepresent or omit any material information in connection with the servicing of a qualified education loan, including misrepresenting (i) the amount, nature, or terms of any fee or payment due or claimed to be due on a qualified education loan; (ii) the terms and conditions of the loan agreement; or (iii) the borrower's obligations under the loan;

3. Obtain property by fraud or misrepresentation;

4. Misapply qualified education loan payments to the outstanding balance of a qualified education loan;

5. Provide inaccurate information to a nationally recognized consumer credit bureau;

6. Fail to report both the favorable and unfavorable payment history of the borrower to a nationally recognized consumer credit bureau at least annually if the loan servicer regularly reports information to such a credit bureau;

7. Fail to communicate with an authorized representative of the borrower who provides a written authorization signed by the borrower, provided that the loan servicer may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the borrower;

8. Make any false statement of a material fact or omit any material fact in connection with any information provided to the Commission or another governmental authority; or

9. Engage in any other prohibited activities identified in regulations adopted by the Commission pursuant to this chapter.

B. A qualified education loan servicer shall comply with all federal laws and regulations applicable to the conduct of its licensed business. In addition to any other remedies provided by law, a violation of any such federal law or regulation shall be deemed a violation of this chapter and a basis upon which the Commission may take enforcement action pursuant to § 6.2-2615, 6.2-2617, or 6.2-2618.

C. A qualified education loan servicer shall not engage in abusive acts or practices when servicing a qualified education loan. An act or practice is abusive in connection with the servicing of a qualified education loan if the act or practice does either of the following:

1. Materially interferes with the ability of a borrower to understand a term or condition of a qualified education loan; or

2. Takes unreasonable advantage of:

a. A lack of understanding on the part of a qualified education loan borrower of the material risks, costs, or conditions of the qualified education loan;

b. The reasonable reliance by the borrower on a person engaged in the servicing of a qualified education loan to act in the interests of the borrower; or

c. The inability of a borrower to protect the interests of the borrower when selecting (i) a qualified education loan or (ii) a feature, term, or condition of a qualified education loan.

2020, cc. 1198, 1250.

§ 6.2-2611. Affirmative acts required of qualified education loan servicers.

Except to the extent that this section is inconsistent with any provision of federal law or regulation, and then only to the extent of the inconsistency, a person engaged in qualified education loan servicing shall:

1. Evaluate a qualified education loan borrower for eligibility for an income-driven repayment program prior to placing the borrower in forbearance or default, if an income-driven repayment program is available to the borrower;

2. Respond to a written inquiry from a qualified education loan borrower or the representative of a qualified education loan borrower within 10 business days after receipt of the request and, within 30 business days after receipt of the request, provide information relating to the request and, if applicable, to the action the qualified education loan servicer will take to correct the account or an explanation for the qualified education loan servicer's position that the borrower's account is correct. Such 30-day period may be extended for not more than 15 days if, before the end of the 30-day period, the qualified education loan servicer notifies the borrower, or the borrower's representative, as applicable, of the extension and the reasons for the delay in responding;

3. Not furnish to a consumer reporting agency, during 60 days following receipt of a written request related to a dispute on a borrower's payment on a qualified education loan, information regarding a payment that is the subject of the written request;

4. Except as provided in federal law or required by a qualified education loan agreement, inquire of a borrower how to apply an overpayment to a qualified education loan. A borrower's direction on how to apply an overpayment to a qualified education loan shall remain in effect for any future overpayments during the term of a qualified education loan or until the borrower provides different directions. As used in this subdivision, "overpayment" means a payment on a qualified education loan that exceeds the monthly amount due from a borrower on the qualified education loan, which payment may be referred to as a prepayment;

5. Apply partial payments in a manner that minimizes late fees and negative credit reporting. If loans on a borrower's qualified education loan account have an equal level of delinquency, a qualified education loan servicer shall apply partial payments to satisfy as many individual loan payments as possible on a borrower's account. As used in this subdivision, "partial payment" means a payment on a qualified education loan account that contains multiple individual loans in an amount less than the amount necessary to satisfy the outstanding payment due on all loans in the qualified education loan account, which payment may be referred to as an underpayment;

6. Require, as a condition of a sale, an assignment, or any other transfer of the servicing of a qualified education loan, that the new loan servicer honor all benefits originally represented as available to a qualified education loan borrower during the repayment of the qualified education loan and preserve the availability of the benefits, including any benefits for which the qualified education loan borrower has not yet qualified. If a qualified education loan servicer is not also the loan holder or is not acting on behalf of the loan holder, the loan servicer satisfies the requirement of this subsection by providing the new loan servicer with information necessary for the new loan servicer to honor all benefits originally represented as available to a qualified education loan borrower during the repayment of the qualified education loan and preserve the availability of the benefits, including any benefits for which the loan borrower has not yet qualified; and

7. In the event of a sale, assignment, or other transfer of the servicing of a qualified education loan that results in a change in the identity of the person to whom a qualified education loan borrower is required to send payments or direct any communication concerning the qualified education loan:

a. Transfer to the new loan servicer all records regarding the qualified education loan borrower, the account of the loan borrower, and the qualified education loan of the loan borrower. Such records include the repayment status of the qualified education loan borrower and any benefits associated with the qualified education loan of the loan borrower. The transfer of records shall be completed within 45 days after the sale, assignment, or other transfer of the servicing of a qualified education loan;

b. Notify affected qualified education loan borrowers of the sale, assignment, or other transfer of the servicing of a qualified education loan at least seven days before the next payment on the loan is due. The notice shall include (i) the identity of the new qualified education loan servicer; (ii) the effective date of the transfer of the borrower's qualified education loan to the new loan servicer; (iii) the date on which the existing loan servicer will no longer accept payments; and (iv) the contact information for the new loan servicer; and

c. Adopt policies and procedures to verify that the new qualified education loan servicer has received all records regarding the qualified education loan borrower, the account of the qualified education loan borrower, and the qualified education loan of the borrower, including the repayment status of the qualified education loan borrower and any benefits associated with the qualified education loan of the borrower.

2020, cc. 1198, 1250.

§ 6.2-2612. Reporting requirements.

A. Within 15 days following the occurrence of any of the following events, a licensee shall file a written report with the Commission describing such event and its expected impact upon the business of the licensee:

1. The filing of bankruptcy, reorganization, or receivership proceedings by or against the licensee;

2. The institution of administrative or regulatory proceedings against the licensee by any governmental authority;

3. Any felony indictment of the licensee or any of its members, directors, senior officers, trustees, or principals;

4. Any felony conviction of the licensee or any of its members, directors, senior officers, trustees, or principals; and

5. Such other events as the Commission may prescribe by regulation.

B. Each licensee shall file periodic written reports with the Commissioner or the Registry containing such information as the Commissioner may require concerning the licensee's business and operations. Reports shall be in the form and be submitted with such frequency and by such dates as may be prescribed by the Commissioner.

2020, cc. 1198, 1250.

§ 6.2-2613. Investigations; examinations.

A. The Commission may, as often as it deems necessary, investigate and examine the affairs, business, premises, and records of any person licensed or required to be licensed under this chapter insofar as they pertain to any business for which a license is required by this chapter. Examinations of licensees shall be conducted at least once in each three-year period. In the course of such investigations and examinations, the owners, members, officers, directors, partners, trustees, and employees of the person being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary.

B. Examinations under this section may be conducted in conjunction with examinations to be performed by representatives of agencies of the federal government or another state. In lieu of conducting an examination, the Commission may accept the examination report of the federal government or another state.

2020, cc. 1198, 1250.

§ 6.2-2614. Annual fees.

A. In order to defray the costs of their examination, supervision, and regulation, every licensee under this chapter shall pay an annual fee calculated in accordance with a schedule set by the Commission. All such fees shall be assessed on or before April 1 for every calendar year. All such fees shall be paid by the licensee to the State Treasurer on or before May 1 following each assessment.

B. In addition to the annual fee prescribed in subsection A, when it becomes necessary to examine or investigate the books and records of a licensee under this chapter at a location outside the Commonwealth, the licensee shall be liable for and shall pay to the Commission within 30 days of the presentation of an itemized statement the actual travel and reasonable living expenses incurred on account of its examination, supervision, and regulation or shall pay a reasonable per diem rate approved by the Commission.

2020, cc. 1198, 1250.

§ 6.2-2615. Suspension or revocation of license.

A. The Commission may suspend or revoke any license issued under this chapter upon any of the following grounds:

1. Any ground for denial of a license under this chapter;

2. Any violation of the provisions of this chapter or regulations adopted by the Commission pursuant thereto, or a violation of any other law or regulation applicable to the conduct of the licensee's business;

3. A course of conduct consisting of the failure to perform written agreements with qualified education loan borrowers;

4. Failure to account for funds received or disbursed to the satisfaction of the person supplying or receiving qualified education loan funds;

5. Conviction of any felony or of a misdemeanor involving fraud, misrepresentation, or deceit;

6. Entry of a judgment against the licensee involving fraud, misrepresentation, or deceit;

7. Entry of a federal or state administrative order against the licensee for violation of any law or regulation applicable to the conduct of the licensee's business;

8. Refusal to permit an investigation or examination by the Commission;

9. Failure to pay any fee or assessment imposed by this chapter; or

10. Failure to comply with any order of the Commission.

B. For the purposes of this section, acts of any senior officer, director, member, partner, trustee, or principal shall be deemed acts of the licensee.

2020, cc. 1198, 1250.

§ 6.2-2616. Notice of proposed suspension or revocation.

The Commission shall not revoke or suspend the license of any licensee upon any of the grounds set forth in § 6.2-2615 until it has given the licensee (i) 21 days' notice in writing of the reasons for the proposed revocation or suspension and (ii) an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of such licensee and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the licensee named therein may file with the Clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not suspend or revoke the license except based upon findings made at such hearing. The hearing shall be conducted in accordance with the Commission's Rules.

2020, cc. 1198, 1250.

§ 6.2-2617. Cease and desist orders.

A. If the Commission determines that any person has violated any provision of this chapter or any regulation adopted by the Commission pursuant thereto, or violated any other law or regulation applicable to the conduct of a licensee's business, the Commission may, upon 21 days' notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter and other applicable laws and regulations. The notice shall be sent by certified mail to the principal place of business of such person or other address authorized under § 12.1-19.1 and shall state the grounds for the contemplated action.

B. Within 14 days of mailing the notice, the person named therein may file with the clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not issue a cease and desist order except on the basis of findings made at the hearing. The hearing shall be conducted in accordance with the Commission's Rules. The Commission may enforce compliance with any order issued under this section by imposition and collection of such fines and penalties as may be prescribed by law.

2020, cc. 1198, 1250.

§ 6.2-2618. Civil penalties.

The Commission may impose a civil penalty not exceeding $2,500 upon any person who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter or regulations adopted by the Commission pursuant thereto or violated any other law or regulation applicable to conduct of the person's business. For the purposes of this section, each separate violation shall be subject to the civil penalty prescribed in this section, and each day that an unlicensed person engages in the business of a qualified education loan servicer shall constitute a separate violation.

2020, cc. 1198, 1250.

§ 6.2-2619. Private cause of action.

A. A qualified education loan servicer shall:

1. Comply with this chapter.

2. Comply with all applicable federal laws related to qualified education loan servicing, as from time to time amended, and the regulations promulgated thereunder.

B. Any person who suffers damage as a result of the failure of a qualified education loan servicer to comply with the requirements of subdivisions A 1 and 2 may bring an action against that qualified education loan servicer to recover or obtain any of the following:

1. Actual damages, but in no case shall the total award of damages be less than $500 per violation;

2. An order enjoining the methods, acts, or practices;

3. Restitution of property;

4. Punitive damages;

5. Attorney fees; and

6. Any other relief the court deems proper.

C. In addition to any other remedies provided by this section or otherwise provided by law, whenever it is proven by a preponderance of the evidence that a qualified education loan servicer has engaged in conduct that substantially interferes with a borrower's right to (i) an alternative payment arrangement; (ii) loan forgiveness, cancellation, or discharge; or (iii) any other financial benefit as established under the terms of a borrower's promissory note or under the Higher Education Act of 1965, 20 U.S.C. § 1070a et seq., as amended from time to time, and regulations promulgated thereunder, the court shall award treble actual damages to the plaintiff, but in no case shall the award of damages be less than $1,500 per violation.

D. The remedies provided in this section are not intended to be the exclusive remedies available to the qualified education loan borrower, and a qualified education loan borrower shall not be required to exhaust any administrative remedies established pursuant to this chapter or any other applicable law prior to proceeding under this section.

2020, cc. 1198, 1250.

§ 6.2-2620. Investigating and restraining prohibited acts.

A. Notwithstanding the provisions of § 59.1-199, whenever the Attorney General has reasonable cause to believe that any person has engaged in, or is engaging in, or is about to engage in any violation of this chapter, the Attorney General is empowered to issue a civil investigative demand. The provisions of § 59.1-9.10 shall apply mutatis mutandis to civil investigative demands issued pursuant to this section.

B. Notwithstanding any other provisions of law to the contrary, the Attorney General may cause an action to be brought in the appropriate circuit court in the name of the Commonwealth to enjoin any violation of this chapter. The circuit court having jurisdiction may enjoin such violations notwithstanding the existence of an adequate remedy at law. In any action under this section, it shall not be necessary that damages be proved.

C. The circuit courts are authorized to issue temporary or permanent injunctions to restrain and prevent violations of this chapter.

2020, cc. 1198, 1250.

§ 6.2-2621. Violation of the Virginia Consumer Protection Act.

Notwithstanding the provisions of § 59.1-199, any violation of the provisions of this chapter shall constitute a prohibited practice in accordance with § 59.1-200 and shall be subject to any and all of the enforcement provisions of the Virginia Consumer Protection Act (§ 59.1-196 et seq.).

2020, cc. 1198, 1250.

§ 6.2-2622. Regulations.

The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to be heard, in accordance with the Commission's Rules.

2020, cc. 1198, 1250.