SB 308

Abstract

This Act adopts the Uniform Special Deposits Act (“the Act”) authored by the Uniform Law Commission. The Uniform Law Commission “provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.” The Act was adopted by the Uniform Law Commission in October 2023 and has been adopted in 2 states and introduced in 3 other states. The Act addresses deposits at a bank where the identity of the person entitled to payment is not determined until the occurrence of a contingency identified at the time that the deposit is created. An example of such an account is an escrow account holding funds that will be paid to one of two potential beneficiaries depending on the outcome of a contingency. Although such accounts are commonly used, the legal protections afforded them are uncertain. The fundamental purpose of the Uniform Special Deposits Act is to provide a vehicle that banks and their customers can elect to use providing greater legal certainty that the expectations of users will be respected. The Act provides a mechanism those that elect to be covered by the Act can use to avoid case law applied to special deposits that is murky and in some ways outdated in the context of modern banking. In determining whether a person is engaged in the business of banking to be considered a bank for purposes of the Act, the business of banking is intended to be construed broadly to include persons that may engage in limited functions that are part of or incidental to the business of banking, such as a trust company that engages in fiduciary and agency activities and has the power and authority to accept a special deposit. This Act takes effect on January 1, 2025.