Thursday, August 18, 2022

July 2008 Legal Briefs

  1. Commissioner’s Bill Revises Several Banking Provisions
  2. Recent Changes to Oklahoma Banking Board’s Regulations
  3. Major Changes to Oklahoma’s Record Retention Schedule
  4. Elder Abuse Punishment Increases

1. Commissioner’s Bill Revises Several Banking Provisions

This year’s House Bill 2725 (the Banking Commissioner’s bill) makes several technical changes to the Oklahoma Banking Code, effective November 1, 2008.  I will outline some provisions that are of particular interest.

1. Refund of Assessments

For the last couple of years the Oklahoma Banking Department has been self-funding—meaning that fees and assessments charged by the Banking Department are paid into a revolving fund controlled by the Banking Department, instead of going into Oklahoma’s general fund.  Under this system, it’s at least possible for the Banking Department to accumulate more funds in its account than it requires for its operations.  (The Legislature no longer automatically takes the “excess” for appropriation to other areas of government.)

This year’s bill, amending Section 211 of the Banking Code, will allow the Oklahoma Banking Board to refund a portion of collected assessments on a pro rata basis.  For example, if the Banking Department only needs 90% of the assessments that it charges to state-chartered banks during a year, the Banking Board can refund the remaining 10% of each bank’s assessment.

The operation of the Banking Department has always been supported by assessments on state-chartered banks, instead of general tax revenues; but many bankers believe any excess assessments that are paid in should “belong” to banks, instead of being appropriated to support general state government.  It’s rare that any legislative provision affects a bank’s budget in a positive way, but this one has the potential to result in a welcome partial refund of assessments.

2. Temporary College Branches

The bill also includes some useful provisions relating to temporary branches.

Section 501.2(E) of the Banking Code has allowed a bank or savings association to open new accounts and accept deposits up to three (3) days per year on the campus of any higher education institution (such as at the beginning of semesters), without applying for branch authority—provided that the financial institution has a main office or branch in the same county and has obtained written permission from the college or university.

This provision is amended in two ways (effective November 1):  First, the state-chartered financial institution will now be required to notify the Oklahoma Banking Department in writing before engaging in this on-campus activity (but no approval by the Banking Department is required).  Second, the number of days that a financial institution can open accounts and accept deposits on campus is increased to seven (7) days per year.

3. Branches at Temporary Events

This year’s bill also adds a new subsection 501.2(F)(3) to the Banking Code, which will allow temporary branches to be approved and operated for a limited time, not to exceed a combined total of fifteen (15) days per year, per institution, “during special events open to the public or to members of a specific group.” 

(This amendment responds to frequent inquiries from many banks who want some way to set up an “account-opening/deposit-taking” booth at the lake festival, jazz festival, craft show, automobile show, county fair, monthly flea market, Fourth of July celebration,  State Fair, horse show, bass tournament, arts festival, sports playoff, or whatever other crowd-drawing activity may be going on in a particular area.  “Special event” is not defined, but could also include a group promotional activity, such as a back-to-school sale (or after-Christmas sale) at the local mall. An eligible “special event” could also be one that is open only to “members of a specific group,” and might even be a homecoming or reunion, convention, or tribal gathering.)

Technically a bank could apply for fifteen separate events of one day each, per year, or one event lasting up to fifteen days—or any combination in between, adding up to fifteen total days. This provision will give more flexibility than needed for a bank located in only one community.  However, a bank with branches in many communities may feel more limited, because the total of fifteen days per year is “per institution” and not “per community.” 

Any temporary branch operated under this provision should be approved in advance by the O.C.C. for national banks, or by the Oklahoma Banking Department for state-chartered banks. State banks must submit their request on a form prescribed by the Commissioner.

4.  Eliminating Certain Fees

If a state bank applies to the Banking Department for approval of a permanent branch, existing law allows the bank to apply for a temporary branch located within 1,000 feet that will be used (not to exceed one year) until the permanent branch is opened.  This year’s amendment to Section 501.2(F)(1) clarifies that no separate application fee will be charged for the temporary branch if it is described in the bank’s application for a permanent branch.

Existing Section 501.2(F)(2) provides that a temporary branch can be approved for a limited time if an existing permanent branch becomes inoperable because of an “emergency” (such as fire, flood, tornado, wind damage, or ice storm).  This year’s amended language makes clear that authority to operate the temporary branch will continue only for so long as the emergency exists, and no fee will be required in applying to operate an emergency temporary branch.  

2. Recent Changes to Oklahoma Banking Board’s Regulations

In 2007 the Oklahoma Banking Department appointed a review committee to study and recommend changes to the Banking Board’s regulations.  As a result, a long list of technical amendments or clarifications to the regulations was adopted by the Banking Board and became effective in May 2008.  (The purpose of regulations is to implement the related statutes, so regulations primarily fill in smaller details.)

There are two ways to access the amended regulations.  First, the Banking Department’s website at www.state.ok.us/~osbd/Banks/Rules/bankrule.htm has a complete online set of state banking regulations as revised by these new changes.  The OBA will also reprint the Oklahoma Banking Code later this summer, with an updated set of regulations in the back.

I will discuss some highlights of the new provisions:

1. Board Reporting/Loans

Rule 85:10-5-4(a)(8) previously required a state bank’s board to receive a monthly report of “all past due loans,” and also defined when certain categories of loans would be considered past-due for this purpose (generally after 30 days).  The revised regulation still requires “all past due loans” to be reported to the board, but there are no longer any time periods included in the regulation.  Instead, a bank’s directors must establish guidelines that determine when various loans will be considered “past due” for purposes of reporting to the board.

2. Board Reporting/Loan Concentration

In addition to other matters required to be reported to the bank’s board of directors, a new subsection, Rule 85: 10-5-4(a)(12), requires monthly reporting to the full board of any loan(s) made since the last report that increase any one borrower’s aggregate indebtedness to a level exceeding 20% of bank capital (or any specific smaller percentage of capital that the board may designate instead).

The size of a particular loan taking the bank over the 20% level might be large or small.  In fact, the “last step” that takes the borrower past the 20% threshold could be as simple as a credit card application or an overdraft.  The aggregate total of loans, not just the size of the new loan, triggers the reporting requirement.

The revised regulation’s language ensures that the board will learn promptly if loan concentrations reach a certain size.  Although in the past nothing has prevented a board from imposing its own reporting requirement in this situation, a particular bank’s board previously may not have considered the advantage in receiving a report of loan concentrations that exist at a “percentage of capital” level as low as two-thirds of the bank’s lending limit.

(Any concentration of loans to one borrower is a concentration of risk.  Each bank’s board must determine what types and levels of risk the bank is willing to take.  In the lending area, a “loan policy” addresses this.  It is almost always useful for the board to maintain higher awareness of loans that represent greater concentrations of risk.)

In many cases a bank’s President, and maybe other senior loan officers (usually with approval of the loan committee, depending on the bank), can make a loan as large as the bank’s full lending limit (30% of capital), with no prior approval from the board.  The regulation does not change that.But the regulation’s new language does establish a “20% of capital” threshold, above which level the full board must be made aware of any borrower’s loan concentration.  Some bank boards will want to be informed of loan concentrations as soon as they reach some percentage of capital that is less than 20%–and the regulation specifically allows this, on an optional basis.

3. Required Info for Loan Participants

A new subsection (e), added to Rule 85: 10-11-13, requires a loan-originating bank to give notice to a loan-participant bank within 30 days after the originating bank either internally or externally classifies a participated loan.

The regulation already provided that the participant bank must receive “complete and current credit information” on the borrower, throughout the term of the loan; but the originating bank’s conclusion drawn from the credit information (for example, an internal decision to classify the loan) may not literally have been covered by the previous language.  Also, because an external classification of a loan is included in an examination report, there previously may have been some uncertainty whether that information could be shared.

But a bank selling loan participations is considered an “agent” of the bank purchasing the participations, and has an implied duty to deal fairly and openly with the bank whose agent it is.  On this basis, I would assume the originating bank already should be informing the participant bank of any classification of the loan that is participated.  But the revised language of the regulation makes this duty clear.

4.  Mandatory Vacation/Internal Control

As part of a bank’s internal control program (unless the bank’s board and bonding company approve otherwise in a specific case), Rule 85: 10-5-3 requires each bank officer and employee to be absent from the bank for at least five consecutive business days per calendar year.

This provision helps to prevent or discover embezzlement, by making the embezzler’s task more difficult.  An employee making false entries on the bank’s books will more likely be caught if he is required to take a long enough vacation—because being gone removes the opportunity to continue making entries to cover up  fraudulent transactions.  (It may also be a good idea to do a “surprise audit” of records in a particular area while the person in charge is on vacation.)

The regulation was amended this year to add the following:  “During the absence of an officer or employee, the duties of the absent officer or employee must be performed by other bank officers and employees.” 

It’s not acceptable merely to allow the absent individual’s tasks to pile up while he is gone.  Instead, someone else must take over that person’s job on a fill-in basis.  This is highly desirable for two reasons.  First, when someone else actively steps into a position (even temporarily), there is a greater chance that irregularities will be noticed.  Second, letting someone “fill in” helps to reduce the number of customer-service issues that go untended, or the amount of time-sensitive tasks that could turn into bigger problems for the bank if not handled in a timely way.

Sometimes an embezzling employee, even though on vacation, states that he or she “just wanted to come in to see everybody,” or wants to bring cookies to everyone,  or “happens to be nearby and wants to check e-mail.” What’s stated as a reason may actually be a “cover” for getting back into the bank and to his/her desk in order to do whatever needs to be done daily to keep improper transactions from being detected. 

To remain consistent with the “internal control” aspect of mandatory vacation days, a bank should keep any “vacationing” employees completely away from their computers and other bank records they normally deal with.  Of course, this applies not only during banking hours, but also at night and over the weekends, during mandatory vacation time. 

Particularly in very small banks, it can be difficult to cover all of the required positions adequately, and a requirement to put someone in charge of the vacationing employee’s tasks (during vacation days) can present a challenge.  One person may need to work overtime to cover two positions while the other person is gone.  The situation is complicated further if the job position that would do the “fill-in” is currently vacant, of if the “fill-in” person calls in sick while the first person is on vacation.  Cross-training all employees to handle tasks in several areas is particularly essential in small banks.

5. Dormant Accounts

Existing Rule 85:11-16, in former subsection (3), now renumbered as subsection (c), permits banks to discontinue paying interest on a “dormant account”; but a bank may pay interest even on dormant accounts, if it wishes–depending on the policy of the bank’s board.

This regulation has been amended to add the following sentence:  “A bank may determine by policy when an account is considered ‘dormant’ and such policy may determine an account is dormant even though it may not be considered abandoned or unclaimed under applicable law.”

The Oklahoma Statutes do not define “dormant account.”  The new sentence added to this regulation clarifies that a bank is free to establish its own test for when an account is “dormant.” 

The basic meaning of “dormant” is “sleeping” (in other words—inactive, unused, or quiet).  In the banking context it refers to an account on which there are no transactions for such a length of time that the bank now feels the customer has stopped using the account.  Of course, the period of time after which the bank would consider an account “dormant” may vary from bank to bank, and according to the type of account.

Different account types are naturally expected to have different levels of activity.  If a checking account has had no activity for six months, the customer has probably stopped using it.  By contrast, it might be fairly normal for the average savings account to have no deposits or withdrawals for six months.  And a one-year C.D. would certainly not have activity in a six-month period.

I wrote an article on dormant accounts in June 2003.  A bank is not required to declare accounts “dormant” at all.  Or it can choose to declare certain categories of accounts “dormant” while other categories may never be considered “dormant.”  (For example, on a savings account with a high balance, the bank is earning money (not losing money) by continuing to hold the account.  It is to the bank’s advantage to retain the account indefinitely, and there is no reason why the bank would want to declare it dormant and start imposing dormant account fees, etc.)

But when an account has a small balance and no activity, it may be greatly to the bank’s advantage to declare the account “dormant” and to start imposing dormant account fees.  For example, on a “totally free checking” account with a $6.81 balance and no activity for six months, there are no monthly service charges, so the account could remain active forever unless something happens.  The account is unprofitable to maintain, so declaring the account “dormant” and imposing monthly “dormant account” fees is the logical solution, eventually wiping out the account’s balance. 

Each bank must decide for itself which types of accounts it wants to eliminate, or stop paying interest on, based on inactivity for a certain time period—and also, in some cases, depending on whether the customer has failed to maintain a minimum adequate balance for that type of account, as defined by the bank.

6.  Registration of Non-bank ATMs

Rule 85: 10-3-20, as amended, expands the previous definition of “bank or trust-related activities” to include “installation of automated teller and/or cash dispensing activities.”As already in effect, any person or entity that is not a bank or trust company must register with the Oklahoma Banking Department before engaging in “bank or trust-related activities in Oklahoma.” 

The amended language requires non-bank entities owning ATMs in Oklahoma to register with the Banking Department and pay an annual fee of $500.  (Although other states regulate non-bank-owned ATMs, Oklahoma has not previously done so.)

7. Retention Schedule

Most bankers are familiar with the Banking Department’s record-retention schedule that appears as Rule 85: 10-3-18.  This year’s amendments have completely eliminated the schedule, as explained in the following section.  In its place Rule 85: 10-3-18 now makes a general statement about complying with any retention requirements in other laws, and also keeping records for a time period consistent with the statute of limitations for bringing or defending a lawsuit with respect to the specific subject.

3. Major Changes to Oklahoma’s Record Retention Schedule

The Banking Department’s record-retention schedule, which fills eleven pages in the OBA’s printed version of the Banking Code, has now been eliminated.  In place of the list of categories of documents that require retention for a specific period of time, Rule 85: 10-3-18 now states the following:“(a) When any law of the state of Oklahoma or federal law requires the retention of a specific record or a specific class, type or category of records for a certain period of time, a bank and trust company shall retain its records falling within such class, type or category for the time period required by such law.  If no Oklahoma state law or federal law prescribes a retention period for a specific record or a specific class, type or category of records, a bank or trust company must retain such records for the period of time that would be necessary to prosecute or defend an action for which such records would be required in the prosecution or defense of the action.”

New paragraph (b) of the regulation authorizes the Oklahoma Banking Commissioner to issue rulings from time to time (if needed) to require certain records to be retained longer than the preceding language would otherwise require.

The regulation’s new approach to record retention is streamlined, stating only general principles, with absolutely no specific categories of documents listed.  In one sense this is more realistic, because it alerts bankers to the reality that they must understand all applicable rules and regulations that apply to their business, and also must retain records, as necessary, to initiate or defend a lawsuit.

1. Limitations of Old Retention Schedule

Although the old retention schedule was written like a comprehensive list, with specific categories of records and time periods to retain those records, it didn’t provide a complete answer to all retention questions, for several reasons:

First, the retention schedule was focused on state law, never attempting to cover the requirements of federal law and regulations.  A bank could not rely exclusively on the retention schedule, needing also to consider federal requirements applying to the same subject. (Whichever set of requirements—state or federal–was tougher with respect to a particular category of documents, that’s what a bank needed to follow.)

Second, some of the categories in the old retention schedule were becoming outdated, even to the point that many of today’s employees could not understand the terminology. Many categories seemed to fit better with a paper-based records system (non-electronic) and a more manual accounting system than we have today. 

Third, in spite of many very specific categories, the retention schedule never seemed to be as complete as bankers would like.  Some bankers wanted an even more detailed “roadmap” for retention of documents. They wanted absolute answers to their questions about retaining and destroying documents.  But it’s very difficult to create something extremely detailed that is also “one size fits all”—and the regulation was mandatory for all banks. 

At the OBA we are constantly fielding questions from bankers who want to know what to do with specific documents that the bank just doesn’t know how long to keep.  Generally such questions arose because the retention schedule did not list that specific document at all. In this situation, the only available approach was often “reasoning by analogy”—for example, figuring out what listed category the specific documents most closely resemble, then determining the time period for that “closely- related” category.  One then could ask, “Is this particular document less important to retain, or certainly no more important to retain than the category of documents that I see listed?”  And if the answer to that question is “yes,” it may be safe to apply the same time period stated for the “closely-related” documents to the unlisted documents under consideration, which seem to be less important (or at least not more important).  This “reasoned approach” to the retention process has always been necessary to “fill in the gaps” in deciding how long various documents should be retained; and this approach may be increasingly necessary in the future, with no more lists of retention schedule categories, but only principles for use in carrying out retention.

Fourth, even after determining that the old retention schedule (1) would treat retention of a certain type of document as “optional” or (2) stated a retention period that had already expired for a particular document, there was often still an issue of whether the bank should save this document anyway for a longer period of time for reasons of its own—particularly if it might be useful documentation for possible future litigation, such as in connection with a loan. 
In many situations bankers ask about a document that does not really fit any category in the old retention schedule; and I help them think about the issue in the following way:  “(1) In what circumstances might you need this document in the future; (2) after what time period would you no longer have that need; and (3) do you have the same information in another format or better version, so that you don’t need to retain both copies?”  Going through this analysis often helps a bank quickly to identify some extremely old records, as well as some of its duplicate records, for which it has no potential future use.  But this analysis also helps a bank to recognize that some of its records really do need to be retained longer than the time periods stated in a retention schedule.

2. Requirements of the Revised Reg

The language of the revised regulation (quoted above) is realistic in telling a bank to do whatever applicable state and federal laws and regulations may require. 
The revised language also states a very reasonable and obvious general principle that a bank needs to keep documents for as long as they might be needed in a lawsuit that the bank might have to prosecute or defend in the future.  In other words, the bank is expected to keep necessary documents until the “statute of limitations” with regard to the particular subject matter runs out—after which time a lawsuit can no longer be started, and further retention of the records would have no benefit. 

The language of the regulation does, however, indirectly allow early destruction of certain documents—those not necessary either (a) to comply with other laws and regulations, or (ii) to prosecute or defend a future legal action relating to the particular subject matter.  For example, with respect to a loan file, a bank would probably want to preserve adequate proof of (1) the amount and fact that the debtor is indebted to the bank, (2) collateral documentation, (3) the bank’s satisfaction of all compliance requirements when the loan was originated, and (4) the debtor’s original application and balance sheet, showing what he was stating at the beginning of the transaction.  If unusual events have occurred during the course of the loan, the bank also might need to retain a copy of notices sent, correspondence, e-mails received, officer notes of phone conversations, etc.  But documents that a lawyer would not need to introduce in court, either to defend or prosecute a case involving this loan, are not subject to retention.

3. Retention Issues

The revised regulation expects a bank to be familiar with each federal or state law or regulation that may have a retention requirement, and to comply with that requirement.  At first glance, this seems a lot harder that just consulting a retention schedule.  On the other hand, banks are already expected to be familiar and comply with all applicable laws and regulations.  In reality, this new approach does not increase what a bank was always required to do.

Just a few examples of federal retention requirements are the following: (1) retaining loan applications and adverse action notices for 25 months (12 months if business credit)–Reg B, Section 202.12; (2) retaining CIP information on new customers for five years after an account is closed (31 CFR Section 103.121(b)(3));  and (3) recordkeeping on persons purchasing cashier’s checks, money orders, or traveler’s checks, for more than $3,000 inclusive (31 CFR Section 103.29(a)) or for wires of $3,000 or more (31 CFR Section 103.22(e)(1)), either of which requires retention for five years (31 CFR Section 103.38(d)).

The litigation-oriented part of the regulation’s new language (requiring a bank to retain records for whatever period of time those records might be needed if a lawsuit were later brought by the bank—or against the bank—concerning the particular transaction) almost expects a banker to be an attorney.  In order to decide how long to keep certain records, the banker might need to understand (1) that particular documents relate to a loan transaction, (2) that a lawsuit can be brought in relation to a loan for as long as six years, and (3) that the time period begins with the date of default, the date of maturity, or the date of payoff, whichever occurs first.  To follow this standard, generally all loan files should be retained for six years after the loan pays off.

As another example, a bank should understand (1) that a deposit agreement or safe deposit rental agreement is a contract, (2) that the time limit for suing on a contract is five years, and (3) that the time period starts either on the date when something is done wrong to violate the contract (such as paying the wrong beneficiary on an account), or the date when the contract period ends.  All deposit agreements, signature cards, CIP files, safe deposit agreements, etc., should be retained for five years after the account or safe deposit box is closed.

Individual transactions on a deposit account generally involve a much shorter time period for bringing a lawsuit.  For example, check items involving an alleged breach of warranty (forged endorsement; alteration; encoding error) have a three-year deadline for bringing suit.  For checks that have been erroneously paid on an account (unauthorized signature; counterfeit check; duplicate debit; etc.) the outside time period for the customer to sue the paying bank is one year, and this period is often shortened by contract to 60 days or somewhat less (as indicated in the deposit agreement and monthly statements).  On this basis, a bank could probably dispose of its electronic (or filmed) images of account statements after about three years and cover all bases relating to time periods during which someone could sue.

However, many banks deliberately retain images of account statements for a longer time than any retention schedule would require–partly as a service to customers.  An audit of a customer’s tax returns is one situation where the bank may be asked to reproduce records to assist the customer.  Items in the customer’s January 2007 monthly statement could be part of deductions claimed on an individual’s 2007 tax returns, due for filing by April 15, 2008, but possibly filed as late as October 15, 2008, with all extensions taken.  The IRS can then audit the return for up to three years after the actual date of filing, so theoretically someone could receive a notice of audit as late as October 2011 that relates to transactions in the January 2007 monthly statement.  As this example illustrates, keeping an image of monthly statements for a minimum of about five years can be useful to customers who need to duplicate their supporting records for tax purposes. 

As stated above, the time period for suing on a contract is five years.  If a customer got into a dispute with a third party over some transaction between them, being able to reproduce a copy of a check or deposit receipt related to a transaction occurring up to five years earlier is about the limit of what would be useful to a customer from bank records.

In addition, banks often receive subpoenas asking for bank account records in connection with divorce cases, disputes between business partners, criminal tax fraud cases, embezzlement, financial abuse of the elderly, and general lawsuits for money owed.  These information requests can be burdensome, so the other side of the document retention issue is whether a bank wants to be sure to destroy monthly statement images after a certain number of years, simply to cut down on the amount of records that the bank must search if it receives a subpoena for records.

4. Formal Retention Policy?

I don’t like to suggest that banks need “one more written policy,” and certainly no bank is required to have a written policy regarding retention of documents—but it might be very useful.

The online version of the Banking Department’s website (listed above) has already been updated to delete the old retention schedule, with its categories and time periods.  When the OBA reprints the Oklahoma Banking Code this year to reflect the new regulations, the printed version of the book will also delete the old retention schedule.

As a starting point, a bank probably should preserve a copy of the old retention schedule.  That document is not complete enough by itself, because (1) it doesn’t include federal law and regulations, (2) the categories do not include all products a bank may be offering today, and (3) it only partially addresses the required objective of keeping documents for the length of time they might be needed if future litigation should arise.  But the old retention schedule still works as a basic “building block” for a good retention policy—not enough to cover everything, but valuable so far as it goes.  Generally, a bank cannot go wrong by continuing to retain documents for at least the length of time stated in the old retention schedule.  (Just doing this much may be very useful, in situations where the bank does not fully understand the reason for retaining certain types of documents.) 

However, the revised regulation obviously expects something more than the old “retention schedule” approach.  Maybe a bank should discuss with its local attorney the “statute of limitations” issues (maximum time for bringing a lawsuit) that apply to the bank’s various lines of business.  By gaining a better understanding of the bank’s future litigation risk (for how many years the bank could be sued with regard to certain products or services), or the documentation needs for litigation that may be brought by the bank in future—such as to collect a loan (what papers will be needed, and for how many years they must be retained, to be able to bring a lawsuit if necessary), a bank could better develop a written policy regarding retention of certain types of documents for a certain number of years.  Of course, as also suggested above, the bank can optionally keep documents for a longer period than legally required—for example, because it’s a service to customers if they can obtain copies of transactions for a longer period of time.

Another approach to the “retention” issue is to divide record storage (and responsibility for retention) by functional area.  For example, the loan department is most familiar with federal regulations relating to loans, and regularly works with the bank’s attorney on collection matters.  The loan department might be best suited to identify what loan-related paperwork needs to be retained, and for how long, and could supervise both retention and destruction of loan-related documents.

Similarly, the operations personnel would more logically be placed in charge of all record storage relating to deposit agreements, CIP files, signature cards, and monthly account statements, and could determine when documents in those areas no longer have any practical purpose either to satisfy regulations or as proof in a possible lawsuit either brought by or filed against the bank.

Perhaps the most common approach is simply to give someone the task, from time to time, of getting rid of a lot of the old records in the storage room, which are taking up too much space.  But with the retention schedule now eliminated (replaced by a broader set of principles that require the bank to understand the purpose of retaining certain documents for certain time periods), I think it is more appropriate to find someone who understands the usefulness, or the specific legal requirements, with respect to a particular category of documents, and to let that person be the one who determines when documents within that category can be destroyed.

From still another perspective, many banks are not destroying documents anywhere near as soon as they are legally allowed to do so.  Depending on how a bank’s records are imaged (or filmed), there may be many different document types stored within the same overall group of files.  (Some of the documents in the group have longer mandatory retention times, and some shorter.)  Rather than sorting through the imaged documents to pick which ones can be destroyed sooner and which ones require longer retention, some banks just keep everything for a long, long time, and destroy records only when they become really old. 
Many times, a bank officer who asks me a retention question just wants to know if the bank can throw away everything that is at least fifteen years old—because doing that much will go a long ways toward solving the “space” problem relating to the bank’s storage of records.In reality, if a bank has enough space to store a lot of old records, it can just keep everything until it’s “really old,” and doing so will largely eliminate the need to understand which categories of documents require retention for different periods of time.

Before leaving this general subject, it’s important to recognize that Section 3001 of the Banking Code allows banks to retain records (1) in paper format, (2) in electronic (imaged) format, or (3) in micro-photographic (microfilm/microfiche) format, and any of these is the equivalent of the other.  There is no requirement to maintain original (paper) documents for any length of time, provided that the bank has the same information in another permitted storage format.  Whether the bank chooses to image or film some of its stored documents after six or twelve months or some other time period (in order to reduce storage space or storage costs) is simply a matter of preference.  Depending on the amount of storage available, the cost of converting documents to images or film may be worthwhile or may be unnecessary.

In the past, the legal department at the OBA has answered a lot of questions regarding document retention periods.  Based upon the regulation’s complete elimination of retention categories and specific time periods, calls concerning this subject will probably become even more frequent.  

4. Elder Abuse Punishment Increases

In 2006 and 2007 the Oklahoma Legislature strengthened the definition of “elder abuse” and increased the penalties.  This year’s Senate Bill 1600, effective July 1, 2008, again tightens the penalties.

S. B. 1600 makes two important changes.  First, it raises the maximum sentence for abuse or financial exploitation of a vulnerable adult (elderly or incapacitated) to twenty-four months (previously eighteen months). 

Second, a conviction for abuse, financial neglect, or financial exploitation of a vulnerable adult is made subject to the “Elderly and Incapacitated Victim’s Protection Act” (found in Title 22, Oklahoma Statutes, beginning with Section 991a-13).  Under that Act, an individual who is guilty must serve at least a minimum sentence of 30 days in jail, even if given probation or a suspended or deferred sentence.  A perpetrator also must make restitution to the victim, or complete a period of community service, or both.

It’s good to see the Legislature becoming increasingly serious about financial abuse of the elderly, and this should be an encouragement to banks to continue reporting suspected financial abuse. 

On the other hand, the total number of financial exploitation cases prosecuted in Oklahoma per year is in the very low double digits.  Although the most outrageous cases are being prosecuted seriously, I personally believe that only a fraction of actual financial abuse cases are being reported or prosecuted.  In some cases, families may be trying to deal with these issues for themselves—but district attorneys also have a problem with crowded dockets, and violent crimes tend to receive a higher priority.

Increased penalties without increased reporting and increased prosecution will not accomplish much.  Let’s hope that more of these crimes will be reported and more cases will actually be filed.