HOUSE BILL NO. 88

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H0088...........................................................by BUSINESS
FINANCIAL FRAUD PREVENTION ACT - Repeals, adds to and amends existing law
to set forth provisions of the Idaho Financial Fraud Prevention Act and the
Idaho Continuing-Care Disclosure Act.
                                                                        
02/02    House intro - 1st rdg - to printing
02/03    Rpt prt - to Bus
02/24    Rpt out - rec d/p - to 2nd rdg
02/25    2nd rdg - to 3rd rdg
03/07    3rd rdg - PASSED - 63-3-4
      AYES -- Anderson, Andrus, Barraclough, Bastian, Bayer, Bedke, Bell,
      Bilbao, Black, Block, Boe, Bolz, Bradford, Chadderdon, Clark,
      Collins, Deal, Denney, Edmunson, Ellsworth, Eskridge, Field(18),
      Field(23), Garrett, Harwood, Henbest, Henderson, Jaquet, Jones, Kemp,
      LeFavour, Martinez, Mathews, McGeachin, McKague, Miller, Mitchell,
      Moyle, Nielsen, Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo,
      Roberts, Rusche, Rydalch, Sali, Sayler, Schaefer, Shepherd(2),
      Shepherd(8), Shirley, Skippen, Smith(30), Smith(24), Smylie,
      Snodgrass, Trail, Wills, Wood, Mr. Speaker
      NAYS -- Barrett, Hart, Loertscher
      Absent and excused -- Cannon, Crow, Lake, Stevenson
    Floor Sponsor - Smith(30)
    Title apvd - to Senate
03/08    Senate intro - 1st rdg - to Com/HuRes
03/16    Rpt out - rec d/p - to 2nd rdg
03/17    2nd rdg - to 3rd rdg
03/23    3rd rdg - PASSED - 34-0-0, 1 vacancy
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst,
      Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce, Richardson,
      Schroeder, Stegner, Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- (District 21 seat vacant)
    Floor Sponsor - Cameron
    Title apvd - to House
03/24    To enrol
03/28    Rpt enrol - Sp signed
03/29    Pres signed
03/30    To Governor
04/05    Governor signed
         Session Law Chapter 265
         Effective: 07/01/05

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 88
                                                                        
                                   BY BUSINESS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO THE DEPARTMENT OF  FINANCE;  REPEALING  SECTIONS  67-2750  THROUGH
  3        67-2764, IDAHO CODE, RELATING TO THE IDAHO CONTINUING-CARE DISCLOSURE ACT;
  4        AMENDING  CHAPTER  27, TITLE 67, IDAHO CODE, BY THE ADDITION OF A NEW SEC-
  5        TION 67-2750, IDAHO CODE, TO PROVIDE A SHORT TITLE; AMENDING  CHAPTER  27,
  6        TITLE  67,  IDAHO  CODE,  BY  THE ADDITION OF A NEW SECTION 67-2751, IDAHO
  7        CODE, TO DEFINE TERMS; AMENDING CHAPTER 27, TITLE 67, IDAHO CODE,  BY  THE
  8        ADDITION  OF  A  NEW  SECTION 67-2752, IDAHO CODE, TO SET FORTH PROHIBITED
  9        CONDUCT; AMENDING CHAPTER 27, TITLE 67, IDAHO CODE, BY THE ADDITION  OF  A
 10        NEW SECTION 67-2753, IDAHO CODE, TO PROHIBIT THE EMPLOYMENT OR AFFILIATION
 11        OF  CERTAIN  PERSONS;  AMENDING  CHAPTER  27, TITLE 67, IDAHO CODE, BY THE
 12        ADDITION OF A NEW SECTION 67-2754, IDAHO CODE, TO SET FORTH THE POWERS  OF
 13        THE  DIRECTOR OF THE DEPARTMENT OF FINANCE; AMENDING CHAPTER 27, TITLE 67,
 14        IDAHO CODE, BY THE ADDITION OF A NEW SECTION 67-2755, IDAHO CODE, TO  PRO-
 15        VIDE  FOR  INJUNCTIONS  AND OTHER REMEDIES; AMENDING CHAPTER 27, TITLE 67,
 16        IDAHO CODE, BY THE ADDITION OF A NEW SECTION 67-2756, IDAHO CODE, TO  PRO-
 17        VIDE  FOR  CUSTOMER  INDEMNIFICATION; AMENDING CHAPTER 27, TITLE 67, IDAHO
 18        CODE, BY THE ADDITION OF A NEW SECTION 67-2757, IDAHO CODE, TO PROVIDE FOR
 19        THE INSTITUTION OF CRIMINAL PROCEEDINGS; AMENDING CHAPTER  27,  TITLE  67,
 20        IDAHO  CODE, BY THE ADDITION OF A NEW SECTION 67-2758, IDAHO CODE, TO PRO-
 21        VIDE CRIMINAL PENALTIES AND TO LIMIT ACTIONS; AMENDING CHAPTER  27,  TITLE
 22        67,  IDAHO  CODE, BY THE ADDITION OF A NEW SECTION 67-2759, IDAHO CODE, TO
 23        PROVIDE THAT CRIMINAL PUNISHMENT IS NOT EXCLUSIVE;  AMENDING  CHAPTER  27,
 24        TITLE  67,  IDAHO  CODE,  BY  THE ADDITION OF A NEW SECTION 67-2760, IDAHO
 25        CODE, TO PROVIDE FOR JUDICIAL REVIEW OF ORDERS; AMENDING CHAPTER 27, TITLE
 26        67, IDAHO CODE, BY THE ADDITION OF A NEW SECTION 67-2761, IDAHO  CODE,  TO
 27        PROVIDE  FOR ADMINISTRATION; AMENDING CHAPTER 27, TITLE 67, IDAHO CODE, BY
 28        THE ADDITION OF A NEW SECTION 67-2762, IDAHO CODE, TO PROVIDE FOR ADMINIS-
 29        TRATIVE PUBLIC HEARINGS AND TO PROVIDE AN EXCEPTION;  AMENDING  TITLE  26,
 30        IDAHO  CODE, BY THE ADDITION OF A NEW CHAPTER 37, TITLE 26, IDAHO CODE, TO
 31        PROVIDE A SHORT TITLE, TO PROVIDE A STATEMENT OF PURPOSE, TO DEFINE TERMS,
 32        TO PROVIDE FOR REGISTRATION AND ANNUAL FEES, TO REQUIRE DISCLOSURE  STATE-
 33        MENTS  OF FINANCIAL RESPONSIBILITY, TO PROVIDE FOR SPECIFICATION FOR RESI-
 34        DENCE CONTRACTS, TO PROVIDE FOR ESCROWS, TRUSTS, SURETY BONDS AND  COLLEC-
 35        TION  OF  DEPOSITS,  TO  PROHIBIT  CROSS-COLLATERALIZATION, TO PROVIDE FOR
 36        AUDITS, TO PROVIDE CIVIL LIABILITY, TO PROVIDE  FOR  INJUNCTIONS,  TO  SET
 37        FORTH  GROUNDS  FOR  DENIAL,  SUSPENSION OR REVOCATION OF REGISTRATION, TO
 38        PROVIDE FOR OATHS AND SUBPOENAS, TO PROVIDE PUNISHMENT, TO SPECIFY  EXEMP-
 39        TION  FROM  CRIMINAL PROSECUTION FOR TESTIMONY, TO PROVIDE CRIMINAL PENAL-
 40        TIES AND TO PROVIDE FOR REGULATORY AUTHORITY;  AMENDING  SECTION  26-1111,
 41        IDAHO  CODE,  TO  PROVIDE A CODE REFERENCE; AMENDING CHAPTER 22, TITLE 26,
 42        IDAHO CODE, BY THE ADDITION OF A NEW SECTION 26-2226, IDAHO CODE,  TO  SET
 43        FORTH  PROHIBITED CONDUCT; AMENDING SECTION 26-2501, IDAHO CODE, TO REVISE
 44        A DEFINITION; AMENDING SECTION 26-2505, IDAHO CODE, TO PROVIDE FOR  ADMIN-
 45        ISTRATION  AND  ENFORCEMENT  BY  THE  DIRECTOR  OF THE IDAHO DEPARTMENT OF
 46        FINANCE AND TO MAKE TECHNICAL CORRECTIONS; AND TO PROVIDE  FOR  SEVERABIL-
                                                                        
                                           2
                                                                        
  1        ITY.
                                                                        
  2    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  3        SECTION 1.  That Sections 67-2750 through 67-2764, Idaho Code, be, and the
  4    same are hereby repealed.
                                                                        
  5        SECTION  2.  That  Chapter  27,  Title 67, Idaho Code, be, and the same is
  6    hereby amended by the addition thereto a NEW SECTION, to be known  and  desig-
  7    nated as Section 67-2750, Idaho Code, and to read as follows:
                                                                        
  8        67-2750.  SHORT  TITLE.  This  act  shall be known and may be cited as the
  9    "Idaho Financial Fraud Prevention Act."
                                                                        
 10        SECTION 3.  That Chapter 27, Title 67, Idaho Code,  be  and  the  same  is
 11    hereby amended by the addition of a NEW SECTION, to be known and designated as
 12    Section 67-2751, Idaho Code, and to read as follows:
                                                                        
 13        67-2751.  DEFINITIONS.  As used in sections 67-2750 through 67-2762, Idaho
 14    Code:
 15        (1)  "Act" or  "Idaho  Financial  Fraud  Prevention  Act"  means  sections
 16    67-2750 through 67-2762, Idaho Code.
 17        (2)  "Department" means the Idaho department of finance.
 18        (3)  "Director"  means  the director of the Idaho department of finance or
 19    his designee.
 20        (4)  "Financial institution" means any state or federally chartered  bank,
 21    savings  bank,  savings and loan association, thrift institution, holding com-
 22    pany, credit union, credit union service organization, "regulated  lender"  as
 23    defined in section 28-41-301(37), Idaho Code, collection agency licensed under
 24    the  Idaho  collection  agency  act, mortgage lender, mortgage broker, or loan
 25    originator licensed under the Idaho residential mortgage practices act, licen-
 26    see under the Idaho money transmitters act, escrow agency, or broker-dealer or
 27    investment advisor licensed under the Idaho securities act or federal law,  or
 28    such  an institution licensed under the laws of another state, and doing busi-
 29    ness in Idaho.
 30        (5)  "Person" means a natural person, firm, partnership, association, cor-
 31    poration, limited liability company, limited liability partnership, trust,  or
 32    any  other  association  of individuals, however organized, and whether or not
 33    citizens or residents of this state.
                                                                        
 34        SECTION 4.  That Chapter 27, Title 67, Idaho Code,  be  and  the  same  is
 35    hereby amended by the addition of a NEW SECTION, to be known and designated as
 36    Section 67-2752, Idaho Code, and to read as follows:
                                                                        
 37        67-2752.  FINANCIAL FRAUD ILLEGAL. It is unlawful for any person, directly
 38    or indirectly:
 39        (1)  To  employ  any  device,  scheme  or  artifice to defraud a financial
 40    institution;
 41        (2)  To obtain or attempt to obtain money, funds, credits, assets, securi-
 42    ties, or other property owned by, or under the custody or control of a  finan-
 43    cial  institution  by means of false or fraudulent pretenses, representations,
 44    or promises or through the use of any fraudulent device, scheme, artifice,  or
 45    fraudulent monetary instrument;
 46        (3)  To  falsely  represent  that a person is a financial institution or a
 47    representative of a financial institution, for the purpose of obtaining money,
                                                                        
                                           3
                                                                        
  1    goods, or services from any person;
  2        (4)  To obtain or record or attempt to obtain or record, personal  identi-
  3    fying  information of another person without the authorization of that person,
  4    for the purpose of obtaining  money,  goods,  or  services  from  any  person,
  5    through  a  false  or  fraudulent representation that the person doing so is a
  6    financial institution. "Personal identifying information" has the same meaning
  7    as set forth in section 18-3122(10), Idaho Code, or any successor to that sec-
  8    tion;
  9        (5)  To fraudulently make, emboss, encode, or use a financial  transaction
 10    card,  financial transaction card account number, personal identification code
 11    or credit card sales draft, as defined in sections 18-3122,  18-3123,  18-3124
 12    and 18-3125A, Idaho Code, or any successors to those sections, for the purpose
 13    of obtaining money, goods, or services from any person; or
 14        (6)  While  serving as an employee, agent or representative of a financial
 15    institution, to obtain or attempt to obtain the money, funds, credits, assets,
 16    securities, or other property owned by, held by, or under the custody or  con-
 17    trol  of, the financial institution by means of false or fraudulent pretenses,
 18    representations, or promises or by means of any fraudulent device,  scheme  or
 19    artifice, or through the use of a fraudulent monetary instrument.
                                                                        
 20        SECTION  5.  That  Chapter  27,  Title  67, Idaho Code, be and the same is
 21    hereby amended by the addition of a NEW SECTION, to be known and designated as
 22    Section 67-2753, Idaho Code, and to read as follows:
                                                                        
 23        67-2753.  EMPLOYMENT OR AFFILIATION OF CERTAIN PERSONS.  Except  with  the
 24    prior written consent of the director, no person who has been convicted of, or
 25    who  has  pled  nolo  contendre to, any criminal offense involving dishonesty,
 26    breach of trust or fiduciary duty,  or  money  laundering,  or  who  has  been
 27    granted  a  withheld  judgment based on such offense, or who has been found to
 28    have violated this act, shall seek  employment  with,  accept  employment  by,
 29    become  employed by, or continue in their employment with an Idaho state char-
 30    tered or licensed financial institution.
                                                                        
 31        SECTION 6.  That Chapter 27, Title 67, Idaho Code,  be  and  the  same  is
 32    hereby amended by the addition of a NEW SECTION, to be known and designated as
 33    Section 67-2754, Idaho Code, and to read as follows:
                                                                        
 34        67-2754.  POWERS OF DIRECTOR. The director shall have the following powers
 35    and authority under this act:
 36        (1)  Investigations. The director may make such public or private investi-
 37    gations  within  or  without  this  state  as  he deems necessary to determine
 38    whether any person has violated this act or is  attempting  or  conspiring  to
 39    violate  this  act.  The  investigative  powers of the director under this act
 40    shall include, but not be limited to, participating  in  joint  or  multistate
 41    investigations  with any regulatory or law enforcement agencies of this state,
 42    any other state, the federal government or authorized agency thereof,  or  any
 43    regulatory or law enforcement agency of another country. The director may also
 44    participate in any antifraud or criminal information network or service avail-
 45    able to the director or the department.
 46        (2)  Statements.  The  director may require or permit any person to file a
 47    statement in writing, under oath, to appear before the director and give  tes-
 48    timony,  or  otherwise, as the director may determine, as to all the facts and
 49    circumstances concerning the matter to be investigated.
 50        (3)  Publication. The director  may  publish  information  concerning  any
 51    violation or attempted violation of this act, or any rule or order hereunder.
                                                                        
                                           4
                                                                        
  1        (4)  Subpoenas  and  production. Either in the course of an investigation,
  2    or in any administrative proceeding brought pursuant to this act, in  addition
  3    to  the  powers  and  penalties  set forth in section 67-2717, Idaho Code, the
  4    director may subpoena documents and witnesses, take evidence, require the pro-
  5    duction of any books, papers, correspondence, memoranda, agreements  or  other
  6    documents  or records in any form or on any media, which the director,  in his
  7    discretion, deems material or relevant.
  8        (a)  Failure to comply. In case of contumacy or refusal to obey a subpoena
  9        or order to compel production issued to any person, any court of competent
 10        jurisdiction, upon application by the director, may issue to  that  person
 11        an order requiring him to appear before the director or the officer desig-
 12        nated by him, to produce documentary evidence if so ordered, to appear and
 13        produce  testimony if so ordered, or to give evidence relating to the mat-
 14        ter under investigation or proceeding and any failure to obey  such  order
 15        of the court may be punished by the court as a contempt of court.
 16        (b)  Use  of  evidence  or testimony.  No person is excused from attending
 17        and testifying, from producing any document or record before the  director
 18        or  obeying  the subpoena of the director or any officer designated by him
 19        or in any proceeding instituted by the director on  the  ground  that  the
 20        testimony  or evidence, documentary or otherwise, required of him may tend
 21        to incriminate him or subject him to a penalty or forfeiture; but no indi-
 22        vidual may be prosecuted or subjected to any penalty or forfeiture for  or
 23        on account of any transaction, matter or thing concerning which he is com-
 24        pelled,  after  claiming his privilege against self-incrimination, to tes-
 25        tify, except that the individual so testifying shall not  be  exempt  from
 26        prosecution and punishment for perjury committed in so testifying.
                                                                        
 27        SECTION  7.  That  Chapter  27,  Title  67, Idaho Code, be and the same is
 28    hereby amended by the addition of a NEW SECTION, to be known and designated as
 29    Section 67-2755, Idaho Code, and to read as follows:
                                                                        
 30        67-2755.  INJUNCTIONS -- OTHER REMEDIES. Whenever it appears to the direc-
 31    tor that any person has engaged or is about to engage in any act  or  practice
 32    constituting  a  violation  of  any provision of this act or any rule or order
 33    hereunder, he may in his discretion:
 34        (1)  Order the person to cease and desist from the violation or  attempted
 35    violation  of  any  provision of this act, rule or order hereunder, if, in the
 36    determination of the director, it is necessary to protect any financial insti-
 37    tution or the public, or a person is violating or is  about  to  violate  this
 38    act,  or other good cause justifies the same, without prior notice to the per-
 39    son or opportunity for hearing.
 40        (2)  Order the person to cease and desist from the violation or  attempted
 41    violation  of  any  provision  of this act, rule or order hereunder and, after
 42    giving reasonable notice and opportunity for a hearing, issue the following:
 43        (a)  An order restoring to any financial institution or person in interest
 44        any consideration, funds or property  which  may  have  been  acquired  or
 45        transferred in violation of this act;
 46        (b)  An  order  that  the  person violating this act, or any rule or order
 47        hereunder, pay a civil penalty to the department of finance in  an  amount
 48        not  to  exceed  five thousand dollars ($5,000) for each violation. In the
 49        event a person violating this act knowingly accepts money representing (i)
 50        equity in a person's home, (ii) a withdrawal from any  individual  retire-
 51        ment  account  or similar account or (iii) a withdrawal from any qualified
 52        retirement plan as defined in the Internal Revenue Code, that  person  may
 53        be  ordered  by  the  director to pay a civil penalty to the department of
                                                                        
                                           5
                                                                        
  1        finance in an amount not to exceed ten thousand dollars ($10,000) for each
  2        violation.
  3        (c)  In addition to the penalties set forth in paragraph (b) of this  sub-
  4        section,  in  the event a person violating this act has knowledge that the
  5        victim is an elder or dependent  adult, that person may be ordered by  the
  6        director  to pay a civil penalty to the department of finance in an amount
  7        not to exceed ten thousand dollars ($10,000) for each violation.  As  used
  8        in  this section, "elder" means any person who is sixty-five (65) years of
  9        age or older. As used in this section, "dependent adult" means any  person
 10        who  is  between  the ages of eighteen (18) and sixty-four (64) years, who
 11        has physical or mental limitations which restrict the person's ability  to
 12        carry  out  normal activities or to protect the person's rights including,
 13        but not limited to, persons who have physical or  developmental  disabili-
 14        ties  or whose physical or mental abilities have diminished because of age
 15        or illness;
 16        (d)  An order that the person violating this act, or  any  rule  or  order
 17        hereunder,  pay costs, which in the discretion of the director may include
 18        an amount representing reasonable attorney's fees  and  reimbursements  of
 19        investigative efforts; or
 20        (e)  An order granting other appropriate remedies.
 21        (3)  Enter  into  a consent order, or other administrative order or agree-
 22    ment, setting forth requirements, limitations and restrictions on  the  future
 23    conduct  or  practices  of  a  person violating this act.  A consent order, or
 24    other administrative order or agreement entered into pursuant to this act, may
 25    include assessment of any of the penalties authorized  in  subsection  (2)  of
 26    this section.
 27        (4)  Bring  an action in any court of competent jurisdiction to enjoin any
 28    such acts or practices and to enforce compliance with this act or any rule  or
 29    order  hereunder.  Upon  a  showing  that  a person has engaged or is about to
 30    engage in any act or practice constituting a violation of this act or any rule
 31    hereunder, a permanent or temporary injunction, restraining order or  writ  of
 32    mandamus  shall  be  granted.  The director shall not be required to furnish a
 33    bond.
 34        (5)  In addition to the remedies in subsection (4) of  this  section,  the
 35    director,  in  his  discretion  and  upon  a showing in any court of competent
 36    jurisdiction that a person has violated the provisions of this act or any rule
 37    or order hereunder, may be granted the following additional remedies:
 38        (a)  An order restoring to any financial institution or to any  person  in
 39        interest any consideration, funds or property which may have been acquired
 40        or transferred in violation of this act;
 41        (b)  An order that the person violating this act, rules or any order here-
 42        under pay a civil penalty to the department of finance in an amount not to
 43        exceed ten thousand dollars ($10,000) for each violation;
 44        (c)  An  order awarding the director all costs incurred, which in the dis-
 45        cretion of the court may include an amount representing reasonable  attor-
 46        ney's fees and reimbursements for investigative efforts; or
 47        (d)  An order granting other appropriate remedies.
 48        (6)  Liability for sanctions, both civil and criminal, and personal juris-
 49    diction  shall  extend  to  all persons who engaged in violations or attempted
 50    violations or who aided and abetted others or conspired with others in  viola-
 51    tions  or  attempted  violations  of  this act and rules and orders hereunder.
 52    Officers and directors of  corporations  shall  not  be  exempt  from  actions
 53    brought for violations, merely because of their capacity as officers or direc-
 54    tors,  if  they have participated in acts making the violations possible or if
 55    they have actual or constructive knowledge of violations  by  the  corporation
                                                                        
                                           6
                                                                        
  1    while acting as an officer, director or member.
                                                                        
  2        SECTION  8.  That  Chapter  27,  Title  67, Idaho Code, be and the same is
  3    hereby amended by the addition of a NEW SECTION, to be known and designated as
  4    Section 67-2756, Idaho Code, and to read as follows:
                                                                        
  5        67-2756.  CUSTOMER INDEMNIFICATION. In the event a  financial  institution
  6    indemnifies  its  customer  for  damages caused by a violation of this act, or
  7    assumes the loss caused its customer by a violation of this act, the financial
  8    institution shall be entitled to sue the violator, at law  or  in  equity,  to
  9    recover any actual damages suffered by its customer, plus costs and attorney's
 10    fees incurred in the bringing of the action.
                                                                        
 11        SECTION  9.  That  Chapter  27,  Title  67, Idaho Code, be and the same is
 12    hereby amended by the addition of a NEW SECTION, to be known and designated as
 13    Section 67-2757, Idaho Code, and to read as follows:
                                                                        
 14        67-2757.  INSTITUTION OF CRIMINAL PROCEEDINGS. The director may refer such
 15    evidence as may be available concerning violations of this act or any rule  or
 16    order  hereunder  to the attorney general, prosecuting attorney, United States
 17    attorney, county, state or federal law  enforcement  agency,  or  foreign  law
 18    enforcement  agency  or  prosecutor.  Any  county prosecuting attorney, or the
 19    attorney general may, in his discretion, with  or  without  such  a  referral,
 20    institute appropriate criminal proceedings under this act.
                                                                        
 21        SECTION  10.  That  Chapter  27,  Title 67, Idaho Code, be and the same is
 22    hereby amended by the addition of a NEW SECTION, to be known and designated as
 23    Section 67-2758, Idaho Code, and to read as follows:
                                                                        
 24        67-2758.  CRIMINAL PENALTIES FOR VIOLATIONS -- LIMITATION OF ACTIONS.  (1)
 25    Any  person who violates any provision of this act or who violates any rule or
 26    order hereunder, shall be guilty of a felony and, upon  conviction,  be  fined
 27    not more than five thousand dollars ($5,000) or imprisoned not more than three
 28    (3) years, or both.
 29        (2)  In  the event a person violates any provision of this act or any rule
 30    or order hereunder, and accepts money under any of the circumstances described
 31    in section 67-2755(2)(b), Idaho Code, or accepts money under any of the  facts
 32    described  in  section  67-2755(2)(c),  Idaho Code, shall, upon conviction, be
 33    fined not more than ten thousand dollars ($10,000) or imprisoned not more than
 34    five (5) years for each violation, or both.
 35        (3)  No indictment or information may be returned under this act more than
 36    five (5) years after the alleged violation.
                                                                        
 37        SECTION 11.  That Chapter 27, Title 67, Idaho Code, be  and  the  same  is
 38    hereby amended by the addition of a NEW SECTION, to be known and designated as
 39    Section 67-2759, Idaho Code, and to read as follows:
                                                                        
 40        67-2759.  CRIMINAL  PUNISHMENT  UNDER  THIS  ACT NOT EXCLUSIVE. Nothing in
 41    this act limits the power of the state or any other law enforcement agency  to
 42    proceed  against  and  punish  any  person for any conduct which constitutes a
 43    crime under any applicable law, statute, code or ordinance.
                                                                        
 44        SECTION 12.  That Chapter 27, Title 67, Idaho Code, be  and  the  same  is
 45    hereby amended by the addition of a NEW SECTION, to be known and designated as
 46    Section 67-2760, Idaho Code, and to read as follows:
                                                                        
                                           7
                                                                        
  1        67-2760.  JUDICIAL REVIEW OF ORDERS. Any person aggrieved by a final order
  2    of  the director may obtain judicial review of that order pursuant to the pro-
  3    visions of chapter 52, title 67, Idaho Code.
                                                                        
  4        SECTION 13.  That Chapter 27, Title 67, Idaho Code, be  and  the  same  is
  5    hereby amended by the addition of a NEW SECTION, to be known and designated as
  6    Section 67-2761, Idaho Code, and to read as follows:
                                                                        
  7        67-2761.  ADMINISTRATION  OF  ACT -- RULES, FORMS AND ORDERS. The adminis-
  8    tration of the provisions of this act shall be under the  general  supervision
  9    and  control  of  the director. The director may from time to time make, amend
 10    and rescind such rules, forms and orders as are necessary  to  carry  out  the
 11    provisions  of this act. No rule or form may be made unless the director finds
 12    that the action is necessary or appropriate in the public interest or for  the
 13    protection  of financial institutions and consistent with the purposes of this
 14    act.
                                                                        
 15        SECTION 14.  That Chapter 27, Title 67, Idaho Code, be  and  the  same  is
 16    hereby amended by the addition of a NEW SECTION, to be known and designated as
 17    Section 67-2762, Idaho Code, and to read as follows:
                                                                        
 18        67-2762.  ADMINISTRATIVE PUBLIC HEARINGS -- EXCEPTION. Every hearing in an
 19    administrative  proceeding  shall be public unless the director in his discre-
 20    tion grants a request that the hearing be conducted privately.
                                                                        
 21        SECTION 15.  That Title 26, Idaho Code, be, and the same is hereby amended
 22    by the addition thereto of a NEW CHAPTER, to be known and designated as  Chap-
 23    ter 37, Title 26, Idaho Code, and to read as follows:
                                                                        
 24                                      CHAPTER 37
 25                         IDAHO CONTINUING-CARE DISCLOSURE ACT
                                                                        
 26        26-3701.  SHORT TITLE. This chapter shall be known and may be cited as the
 27    "Idaho Continuing-Care Disclosure Act."
                                                                        
 28        26-3702.  STATEMENT OF PURPOSE. The legislature recognizes that continuing
 29    care  communities  have  become an important and necessary alternative for the
 30    long-term residential, social and health maintenance needs  for  many  of  the
 31    state's elderly citizens.
 32        The  legislature finds and declares that tragic consequences can result to
 33    citizens of the state when a provider of  services  under  a  continuing  care
 34    agreement becomes  insolvent or unable to provide responsible care. The legis-
 35    lature  recognizes  the  need for full disclosure with respect to the terms of
 36    agreements between prospective residents and the provider and  the  operations
 37    of  such  providers.  Accordingly,  the  legislature has determined that these
 38    providers should be regulated in accordance with the provisions of this  chap-
 39    ter.  The  provisions of this chapter apply equally to for-profit and not-for-
 40    profit provider organizations. The provisions of this  chapter  shall  be  the
 41    minimum  requirements  to be imposed upon any person, association or organiza-
 42    tion offering or providing continuing care as set forth in this chapter.
                                                                        
 43        26-3703.  DEFINITIONS. As used in this chapter:
 44        (1)  "Continuing care" means the furnishing to an individual,  other  than
 45    an individual related by blood, marriage, or adoption to the person furnishing
 46    the  care,  of  lodging  together  with nursing services, medical services, or
                                                                        
                                           8
                                                                        
  1    other health related services, pursuant to an agreement requiring an  entrance
  2    fee.
  3        (2)  "Department" means the department of finance.
  4        (3)  "Director"  means  the  director  of the department of finance or his
  5    authorized designee.
  6        (4)  "Entrance fee" means an initial or deferred transfer to a provider of
  7    a sum of money or other property made or promised to be made as full  or  par-
  8    tial consideration for acceptance of a specified individual as a resident in a
  9    facility. A fee which is less than the sum of the regular periodic charges for
 10    six  (6)  months of residency will not be considered to be an entrance fee for
 11    the purposes of this chapter.
 12        (5)  "Facility" means the place or places in which a person undertakes  to
 13    provide continuing care to an individual.
 14        (6)  "Living unit" means a room, apartment, cottage or other area within a
 15    facility set aside for the exclusive use or control of one (1) or more identi-
 16    fied individuals.
 17        (7)  "Provider"  means  the  promoter, developer, or owner of a continuing
 18    care facility, whether a natural person, partnership, unincorporated  associa-
 19    tion,  trust, or corporation, or any other person, or that person's successors
 20    or assigns that solicits or undertakes to provide continuing care to the  pub-
 21    lic under a continuing care facility contract.
 22        (8)  "Resident" means an individual entitled to receive continuing care in
 23    a facility.
                                                                        
 24        26-3704.  REGISTRATION  -- ANNUAL FEE. Each provider who provides continu-
 25    ing care services in this state shall register with the director on forms pro-
 26    vided by the department and shall pay an annual registration fee. Such  regis-
 27    tration  fee  shall be fixed by the director but shall not exceed five hundred
 28    dollars ($500) per facility.  No provider shall be allowed to operate a facil-
 29    ity until so registered and until the provider has filed with the  director  a
 30    disclosure  statement  as  set  forth in section 26-3705, Idaho Code. All fees
 31    received by the director shall be deposited into  the  finance  administrative
 32    account pursuant to section 67-2702, Idaho Code.
                                                                        
 33        26-3705.  DISCLOSURE STATEMENT OF FINANCIAL RESPONSIBILITY. As a condition
 34    to  registration  with  the  department,  each  provider must file evidence of
 35    financial responsibility. Said evidence shall be on  registration  forms  pro-
 36    vided  by  the director. The registration forms shall request such information
 37    as the director, in his discretion, shall deem appropriate to  carry  out  the
 38    functions  of this chapter. The director shall require, however, the following
 39    information to be included on the provider's statement of financial  responsi-
 40    bility:
 41        (1)  The   names  and  business  addresses  of  the  officers,  directors,
 42    trustees,  managing or general partners, any person having a ten percent (10%)
 43    or greater equity or beneficial interest in the provider, and any  person  who
 44    will  be  managing  the  facility  on a day-to-day basis, and a description of
 45    these persons' interests in or occupations with the provider.
 46        (2)  Information as follows on all persons named in response to the infor-
 47    mation required in subsection (1) of this section:
 48        (a)  A description of the business experience of this person, if  any,  in
 49        the operation or management of similar facilities;
 50        (b)  The  name and address of any professional service, firm, association,
 51        trust, partnership, or corporation in which this person has, or which  has
 52        in  this  person,  a ten percent (10%) or greater interest and which it is
 53        presently intended shall currently or in the future provide goods, leases,
                                                                        
                                           9
                                                                        
  1        or services to the facility, or to residents of the facility, of an aggre-
  2        gate value of five hundred dollars ($500) or more within any year, includ-
  3        ing a description of the goods, leases, or services and  the  probable  or
  4        anticipated  cost  thereof  to  the  facility, provider, or residents or a
  5        statement that this cost cannot presently be estimated; and
  6        (c)  A description of any matter in which the person: (i)  has  been  con-
  7        victed,  or found guilty of, or received a withheld judgment for a felony,
  8        or been held liable, or enjoined in a  civil  action  by  final  judgment,
  9        which civil action involved fraud, embezzlement, fraudulent conversion, or
 10        misappropriation  of property; or (ii) is subject to a currently effective
 11        injunctive or restrictive court  order  in  any  action  involving  fraud,
 12        embezzlement,  fraudulent  conversion, or misappropriation of property; or
 13        (iii) within the past five (5) years, had  any  local,  state  or  federal
 14        license or permit suspended or revoked as a result of fraud, embezzlement,
 15        fraudulent conversion, or misappropriation of property.
 16        (3)  A statement as to whether the provider is, or is not affiliated with,
 17    an  eleemosynary  or  other nonprofit organization, the extent of the affilia-
 18    tion, if any, the extent to which the affiliate organization will be responsi-
 19    ble for the financial and contract obligations of the provider, and the provi-
 20    sion of the federal Internal Revenue Code, if any, under which the provider or
 21    affiliate is exempt from the payment of income tax.
 22        (4)  A detailed description of all fees required of  residents,  including
 23    the  entrance fee and periodic charges, if any. The description shall include,
 24    but not be limited to:
 25        (a)  The circumstances under which  the  resident  will  be  permitted  to
 26        remain in the facility in the event of financial difficulties of the resi-
 27        dent;
 28        (b)  The  terms  and conditions under which a contract for continuing care
 29        at the facility may be canceled by the provider or by  the  resident,  and
 30        the  conditions under which all or any portion of the entrance fee will be
 31        refunded in the event of cancellation of the contract by the  provider  or
 32        by  the  resident or in the event of the death of the resident prior to or
 33        following occupancy of a living unit;
 34        (c)  The manner by which the provider may adjust periodic charges or other
 35        recurring fees and the limitations on these adjustments, if any;  and,  if
 36        the  facility is already in operation, or if the provider or manager oper-
 37        ates one (1) or more similar continuing care locations within this  state,
 38        tables  shall  be included showing the frequency and average dollar amount
 39        of each increase in periodic charges, or  other  recurring  fees  at  each
 40        facility  or  location  for  the  previous five (5) years, or such shorter
 41        period as the facility or location may have been operated by the  provider
 42        or manager.
 43        (5)  The  health and financial conditions required for an individual to be
 44    accepted as a resident and to continue as a resident once accepted,  including
 45    the  effect  of  any  change  in the health or financial condition of a person
 46    between the date of entering a contract for continuing care and  the  date  of
 47    initial occupancy of a living unit by that person.
 48        (6)  The provisions that have been made or will be made to provide reserve
 49    funding  or  security  to enable the provider to perform its obligations fully
 50    under contracts to provide continuing care  at  the  facility,  including  the
 51    establishment  of escrow accounts, trusts, or reserve funds, together with the
 52    manner in which these funds will be invested, and the names and experience  of
 53    any  individuals  in  the  direct employment of the provider who will make the
 54    investment decisions.
 55        (7)  Certified financial statements of the provider, including (i) a  bal-
                                                                        
                                           10
                                                                        
  1    ance  sheet  as  of  the  end  of the most recent fiscal year, and (ii) income
  2    statements for the three (3) most recent fiscal years of the provider or  such
  3    shorter  period  of  time  as  the  provider shall have been in existence. The
  4    director shall only accept certified financial statements that have been  pre-
  5    pared  and  certified  by or under the direction of a certified public accoun-
  6    tant. If the provider's fiscal year ended more than one hundred  twenty  (120)
  7    days prior to the date the disclosure statement is recorded, interim financial
  8    statements  as  of  a date not more than ninety (90) days prior to the date of
  9    recording the statement shall be included, but need not be certified.
 10        (8)  A summary of a report of an actuary, updated every  five  (5)  years,
 11    that estimates the capacity of the provider to meet its contract obligation to
 12    the residents. Disclosure statements of continuing care facilities established
 13    prior to January 1, 1988, do not need an actuary report or summary until Janu-
 14    ary 1, 1993.
 15        (9)  If  operation  of  the facility has not yet commenced, a detailed and
 16    itemized statement of the anticipated source and application of the funds used
 17    or to be used in the purchase or construction of the facility. Said statements
 18    shall also include a detailed and itemized estimate of the funds, if any, that
 19    are anticipated to be necessary to fund start-up losses  and  provide  reserve
 20    funds to assure full performance of the obligations of the provider under con-
 21    tracts for the provision of continuing care.
 22        (10) Pro  forma annual income statements and balance sheets for the facil-
 23    ity for a period of not less than five (5) fiscal years with supporting  docu-
 24    mentation as the director may, in his discretion, require.
 25        (11) All material information relevant to a decision of a prospective res-
 26    ident  to  enter into a continuing care contract with the provider, whether or
 27    not specifically requested by the director.
 28        (12) All other information required by the director.
 29        (13) The cover page of the disclosure statement shall state, in  a  promi-
 30    nent  location and in boldface type, the date of the disclosure statement, the
 31    last date through which that disclosure statement may be delivered if not ear-
 32    lier revised, and that the delivery of the disclosure statement to a contract-
 33    ing party before the execution of a contract for the provision  of  continuing
 34    care  is  required  by  this chapter but that the disclosure statement has not
 35    been reviewed or approved by any government agency or representative to ensure
 36    accuracy or completeness of the information set out.
 37        (14) A copy of the standard form of contract for continuing care  used  by
 38    the  provider  shall be attached to and be considered a part of the disclosure
 39    statement.
                                                                        
 40        26-3706.  SPECIFICATION FOR RESIDENCE CONTRACTS. (1)  In addition to  such
 41    other  provisions as may be considered proper to effectuate the purpose of any
 42    continuing care agreement, each agreement executed on and after  the  date  of
 43    the  adoption of this chapter shall be written in nontechnical language easily
 44    understood by a layperson and shall:
 45        (a)  Show the value of all property transferred, including donations, sub-
 46        scriptions, fees and any other amounts paid or payable by,  or  on  behalf
 47        of, the resident or residents;
 48        (b)  Specify  in  detail all services which are to be provided by the pro-
 49        vider to each resident;
 50        (c)  Describe the health and financial conditions upon which the  provider
 51        may have the resident relinquish his space in the designated facility;
 52        (d)  State the fees and conditions that will apply if the resident marries
 53        while at the designated facility;
 54        (e)  Provide  that the agreement may be canceled upon the giving of notice
                                                                        
                                           11
                                                                        
  1        of cancellation of at least thirty (30) days by the resident. An agreement
  2        may be canceled by the provider if there has been a good faith  determina-
  3        tion  in  writing, signed by the medical director and the administrator of
  4        the facility, that a resident is a danger to himself or others;
  5        (f)  Provide in print no smaller than the largest type used in the body of
  6        said agreement, the terms governing the  refund  of  any  portion  of  the
  7        entrance fee;
  8        (g)  State  the terms under which an agreement is canceled by the death of
  9        the resident. The agreement may contain a provision to  the  effect  that,
 10        upon the death of the resident, the moneys paid for the continuing care of
 11        such  resident  shall  be considered earned and become the property of the
 12        provider;
 13        (h)  Provide for advance notice to the resident, of not less  than  thirty
 14        (30)  days,  before  any change in fees or charges or the scope of care or
 15        services may be effective, except for changes required by state or federal
 16        assistance programs;
 17        (i)  Provide that charges for care paid in one (1) lump sum shall  not  be
 18        increased  or  changed during the duration of the agreed upon care, except
 19        for changes required by state or federal assistance programs.
 20        (2)  A resident shall have the right to rescind a continuing  care  agree-
 21    ment,  without  penalty  or  forfeiture, within seven (7) days after making an
 22    initial deposit or executing the agreement. A resident shall not  be  required
 23    to move into the facility designated in the agreement before the expiration of
 24    the seven (7) day period.
 25        (3)  If  a resident dies before occupancy date, or through illness, injury
 26    or incapacity is precluded from becoming a resident under  the  terms  of  the
 27    continuing  care  agreement,  the agreement is automatically rescinded and the
 28    resident or his legal representative shall receive a full refund of all moneys
 29    paid to the facility, except those costs specifically incurred by the facility
 30    at the request of the resident and set forth in writing in a  separate  adden-
 31    dum, signed by both parties to the agreement.
 32        (4)  No agreement for care shall permit dismissal or discharge of the res-
 33    ident  from  the facility providing care prior to the expiration of the agree-
 34    ment, without just cause for such a removal. Just cause may include,  but  not
 35    be  limited  to,  a good faith determination in writing, signed by the medical
 36    director and the administrator of the facility that a resident is a danger  to
 37    himself  or  others  while remaining in the facility. Dismissal for just cause
 38    shall not affect the resident's qualification for a refund under the contract.
 39        (5)  No act, agreement or statement of any resident, or of any  individual
 40    purchasing care for a resident under any agreement to furnish care to the res-
 41    ident,  shall  constitute  a  valid  waiver  of  any provision of this chapter
 42    intended for the benefit or protection of the resident or the individual  pur-
 43    chasing care for the resident.
                                                                        
 44        26-3707.  ESCROW -- TRUST -- SURETY BOND -- COLLECTION OF DEPOSITS. (1)  A
 45    provider  shall  establish  an  escrow account with a bank or a trust company,
 46    that is located in Idaho, agreed upon by the provider and  the  resident.  The
 47    terms  of  this  escrow  account  shall  provide  that the total amount of any
 48    entrance fee received by the provider prior to the date the resident  is  per-
 49    mitted  to  occupy  a  living  unit  in  the facility be placed in this escrow
 50    account. These funds may be released only as follows:
 51        (a)  If the entrance fee applies to a living unit that has been previously
 52        occupied in the facility, the entrance fee shall be released to  the  pro-
 53        vider when the living unit becomes available for occupancy by the new res-
 54        ident;
                                                                        
                                           12
                                                                        
  1        (b)  If  the entrance fee applies to a living unit which has not been pre-
  2        viously occupied by any resident, the entrance fee shall  be  released  to
  3        the provider when the escrow agent is satisfied that:
  4             (i)   Construction  or purchase of the living unit has been completed
  5             and an occupancy permit, if applicable, covering the living unit  has
  6             been  issued  by  the local government having authority to issue such
  7             permits;
  8             (ii)  A commitment has been received by the provider for  any  perma-
  9             nent  mortgage  loan,  long-term financing or other source of capital
 10             and any conditions of the commitment prior to disbursement  of  funds
 11             thereunder have been substantially satisfied; and
 12             (iii) Aggregate  entrance fees received or receivable by the provider
 13             pursuant to binding continuing care retirement  community  contracts,
 14             plus  the  anticipated proceeds of any first mortgage loan, long-term
 15             financing commitment, or other source of capital, are  equal  to  not
 16             less  than ninety percent (90%) of the aggregate cost of constructing
 17             or purchasing, equipping and furnishing the facility  plus  not  less
 18             than  ninety percent (90%) of the funds estimated in the statement of
 19             anticipated source and application of funds submitted by the provider
 20             as that part of the disclosure statement required in section 26-3705,
 21             Idaho Code, to be necessary to fund start-up losses and  assure  full
 22             performance of the obligations of the provider pursuant to continuing
 23             care retirement community contracts.
 24        (2)  Upon receipt by the escrow agent of a request by the provider for the
 25    release  of  these escrow funds, the escrow agent shall approve release of the
 26    funds within five (5) working days unless the  escrow  agent  finds  that  the
 27    requirements  of subsection (1) of this section have not been met and notifies
 28    the provider of the basis for this finding. The request  for  release  of  the
 29    escrow funds shall be accompanied by any documentation the fiduciary requires.
 30        (3)  If  the  provider fails to meet the requirements for release of funds
 31    held in this escrow account within a time period the  escrow  agent  considers
 32    reasonable,  these  funds shall be returned by the escrow agent to the persons
 33    who have made payment to the provider. The escrow agent shall notify the  pro-
 34    vider  of the length of this time period when the provider requests release of
 35    the funds.
 36        (4)  An entrance fee held in escrow may be returned by the escrow agent to
 37    the person who made payment to the provider at any time upon  receipt  by  the
 38    escrow  agent  of  notice  from the provider that this person is entitled to a
 39    refund of the entrance fee.
 40        (5)  In addition to the escrow requirement of this section, each  provider
 41    shall  provide  a  surety  bond  or  an irrevocable letter of credit in a form
 42    acceptable to the  department. Any surety bond offered as evidence  of  finan-
 43    cial  responsibility must be written by a company authorized to do business in
 44    this state. The bond must be in effect at any time that funds remain in escrow
 45    under the provisions of this section and shall be an amount not less than  the
 46    aggregate value of all outstanding amounts in escrow.
                                                                        
 47        26-3708.  CROSS-COLLATERALIZATION  PROHIBITED. No part of the entrance fee
 48    placed in escrow may be pledged by the provider as collateral for the  purpose
 49    of  securing  loans  for  any purpose other than providing for the care of the
 50    resident.
                                                                        
 51        26-3709.  AUDITS. Each provider upon annual renewal of registration  shall
 52    provide  to  the director certified audited reports of the financial condition
 53    of the facility and shall amend the disclosure required  by  section  26-3704,
                                                                        
                                           13
                                                                        
  1    Idaho  Code,  as necessary. The annual audited reports shall be prepared by or
  2    under the supervision and direction of a certified public accountant according
  3    to generally accepted accounting principles and shall contain such  additional
  4    information  as  may be required by the director. The annual renewal of regis-
  5    tration shall be filed with the director not later than ninety (90) days after
  6    the close of the provider's fiscal year as used for state income tax purposes.
                                                                        
  7        26-3710.  CIVIL LIABILITY. (1) Any person who, as a provider, or on behalf
  8    of a provider:
  9        (a)  Enters into a contract for continuing care at a  facility  which  has
 10        not registered under this chapter;
 11        (b)  Enters into a contract for continuing care at a facility without hav-
 12        ing  first  delivered  a  disclosure statement meeting the requirements of
 13        this chapter to the person contracting for such continuing care;
 14        (c)  Enters into a contract for continuing care at a facility with a  per-
 15        son who has relied on a disclosure statement which contains a misstatement
 16        of  a  material  fact or which omits a material fact required to be stated
 17        therein or necessary in order to make  the  statements  made  therein,  in
 18        light of the circumstances under which they are made, not misleading; or
 19        (d)  Engages  in any fraudulent or deceptive practices in the provision of
 20        services to the resident, or prospective resident;
 21    shall be deemed to have violated the terms of this chapter and shall be liable
 22    to the person contracting for such continuing care for damages  and  repayment
 23    of  all fees paid to the provider, facility or person in violation of the pro-
 24    visions of this chapter, less the reasonable value of care  and  lodging  pro-
 25    vided  to  the resident by or on whose behalf the contract for continuing care
 26    was entered into prior to discovery of the violation, misstatement or omission
 27    or the time the violation, misstatement or  omission  should  reasonably  have
 28    been  discovered,  together  with interest thereon at the legal rate for judg-
 29    ments and court costs and reasonable attorney's fees.
 30        (2)  Liability under this section shall exist regardless of whether or not
 31    the provider or person liable had actual  knowledge  of  the  misstatement  or
 32    omission.
 33        (3)  A person may not file or maintain an action under this section if the
 34    person, before filing the action, received an offer, approved by the director,
 35    to  refund  all  amounts paid the provider, facility or person in violation of
 36    the provisions of this chapter together with interest from the  date  of  pay-
 37    ment,  less  the  reasonable  value  of care and lodging provided prior to the
 38    receipt of the offer and the person failed to accept the offer  within  thirty
 39    (30)  days of receipt. At the time a provider makes a written offer of rescis-
 40    sion, the provider shall  file a copy with the director. The rescission  offer
 41    shall recite the provisions of this section.
 42        (4)  An  action  shall  not  be  maintained to enforce a liability created
 43    under this chapter unless brought before the expiration of six (6) years after
 44    the execution of the contract for continuing  care  which  gave  rise  to  the
 45    violation.
 46        (5)  Except  as  expressly  provided  in  this chapter, civil liability in
 47    favor of a private party shall not arise against  a  person,  by  implication,
 48    from  or  as a result of the violation of this chapter or a rule or order pro-
 49    mulgated or issued under this chapter. This chapter shall not limit a  liabil-
 50    ity which may exist by virtue of any other statute or under common law if this
 51    chapter were not in effect.
                                                                        
 52        26-3711.  INJUNCTIONS. Whenever it appears to the director that any person
 53    has  engaged  in, or is about to engage in, any act or practice constituting a
                                                                        
                                           14
                                                                        
  1    violation of any provision of this chapter or any rule or order hereunder, the
  2    director may:
  3        (1)  Issue an order directed at any such person requiring such  person  to
  4    cease and desist from engaging in such act or practice.
  5        (2)  Bring  an  action  in any court which has appropriate jurisdiction to
  6    enjoin the acts or practices and to enforce compliance with  this  chapter  or
  7    any  rule  or  order hereunder. Upon a showing that a person has engaged or is
  8    about to engage in an act or practice constituting a violation of this chapter
  9    or any rule or directive of the director promulgated hereunder, a permanent or
 10    temporary injunction, restraining order or writ of mandamus shall  be  granted
 11    and  a  receiver  or  conservator  may  be  appointed for the defendant or the
 12    defendant's assets. The director shall not be required to post a bond.
                                                                        
 13        26-3712.  DENIAL, SUSPENSION, REVOCATION OF REGISTRATION --  GROUNDS.  The
 14    director may by order deny, suspend or revoke registration of any provider:
 15        (1)  If he finds the order is in the public interest; or
 16        (2)  Any of the conditions described in section 26-3705(2)(c), Idaho Code,
 17    apply to the provider.
 18        In  addition  the  director may impose an administrative fine in an amount
 19    not to exceed five thousand dollars ($5,000) for each violation of the  provi-
 20    sions of this chapter.
 21        Prior  to  the  revocation or suspension of any registration, the provider
 22    shall be given an opportunity for an appropriate contested case in  accordance
 23    with  the  provisions of chapter 52, title 67, Idaho Code.  Judicial review of
 24    the final order of the director shall be governed by  chapter  52,  title  67,
 25    Idaho Code.
                                                                        
 26        26-3713.  OATHS  --  SUBPOENAS  --  PUNISHMENT  -- EXEMPTION FROM CRIMINAL
 27    PROSECUTION FOR TESTIMONY. For the purpose of any investigation or  proceeding
 28    under  this chapter the director or any officer designated by him may adminis-
 29    ter oaths and affirmations, subpoena witnesses, compel their attendance,  take
 30    evidence and require the production of any books, papers, correspondence, mem-
 31    oranda, agreements or other documents or records which the director deems rel-
 32    evant or material to the inquiry.
 33        (1)  In case of contumacy or refusal to obey a subpoena issued to any per-
 34    son,  any  court  of competent jurisdiction, upon application by the director,
 35    may issue to that person an order requiring him to appear before the  director
 36    or  the officer designated by him, there to produce documentary evidence if so
 37    ordered or to give evidence relating to the matter  under investigation or  in
 38    question  and  any  failure to obey such order of the court may be punished by
 39    the court as a contempt of court.
 40        (2)  No person is excused from attending and  testifying,  from  producing
 41    any document or record before the director or from obeying the subpoena of the
 42    director  or  any officer designated by him or in any proceeding instituted by
 43    the director on the ground that the  testimony  or  evidence,  documentary  or
 44    otherwise,  required  of  him  may tend to incriminate him or subject him to a
 45    penalty or forfeiture; but no individual may be prosecuted or subjected to any
 46    penalty or forfeiture for or on account of any transaction,  matter  or  thing
 47    concerning  which  he is compelled, after claiming his privilege against self-
 48    incrimination, to testify, except that the individual so testifying shall  not
 49    be exempt from prosecution and punishment for perjury committed in so testify-
 50    ing.
                                                                        
 51        26-3714.  CRIMINAL  PENALTIES. (1)  Any person who willfully and knowingly
 52    violates any provision of this chapter, or any rule or order under  the  chap-
                                                                        
                                           15
                                                                        
  1    ter,  shall  be  guilty of a misdemeanor and be sentenced to pay a fine of not
  2    more than one thousand dollars ($1,000) or imprisonment for not more than  one
  3    (1) year in the county jail or both for each violation.
  4        (2)  The  director  may  refer  such  evidence  as is available concerning
  5    violations of the provisions of this chapter or of any rule or order hereunder
  6    to the attorney general or the proper prosecuting attorney who  may,  with  or
  7    without such a reference, institute the appropriate criminal proceedings under
  8    this chapter.
  9        (3)  Nothing  in  this chapter limits the power of the state to punish any
 10    person for any conduct which constitutes a crime under any other statute.
                                                                        
 11        26-3715.  REGULATORY AUTHORITY. The director shall have the  authority  to
 12    adopt, amend or repeal such rules as are reasonably necessary for the enforce-
 13    ment of the provisions of this chapter.
                                                                        
 14        SECTION  16.  That Section 26-1111, Idaho Code, be, and the same is hereby
 15    amended to read as follows:
                                                                        
 16        26-1111.  RECORDS NOT PUBLIC. (1) The department  of  finance  shall  keep
 17    proper books and records of all regulatory acts, matters and things done by it
 18    under  the  provisions  of chapters 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 18,
 19    21, 26, 32, 33, 34, 35, and 36 and 37, title 26, Idaho Code, as records of its
 20    office, but the same shall be subject to disclosure according  to  chapter  3,
 21    title  9, Idaho Code, except as otherwise provided in this section and in sec-
 22    tions 26-1112 and 67-2743E, Idaho Code.
 23        (2)  All written communications and copies thereof,  between  the  depart-
 24    ment,  the  director, department employees and any bank, bank holding company,
 25    trust company, savings and loan association and credit union which  relate  in
 26    any  manner  to the examination or condition of the financial institution, are
 27    the property of the department of finance and,  if  acquired  by  any  person,
 28    shall be returned to the department upon written demand.
 29        (3)  (a) The  director  of  the department of finance, any federal bank or
 30        other financial institution regulatory  or  supervisory  agency,  and  any
 31        bank,  bank  holding company, trust company, savings and loan association,
 32        or credit union incorporated or chartered under title 26, Idaho  Code,  or
 33        under  federal law or the law of any state and doing business in the state
 34        of Idaho, shall each have a privilege to refuse to disclose and to prevent
 35        any other person from disclosing confidential communications, and the con-
 36        tents of  any  documents  relating  to  any  confidential  communications,
 37        between the financial institution and the department of finance or federal
 38        bank or financial institution regulatory or supervisory agency made during
 39        the regulatory relationship.
 40        (b)  A  communication  is confidential if it is made during the regulatory
 41        relationship between the department of finance  or  the  federal  bank  or
 42        other  financial institution regulatory or supervisory agency and any such
 43        bank, bank holding company, trust company, savings and loan association or
 44        credit union, and if the communication is not  designed  or  intended  for
 45        disclosure to any other parties.
 46        (c)  The  privilege  may be claimed by the financial institution or by the
 47        department of finance or the federal bank or other  financial  institution
 48        regulatory  or supervisory agency, or by the lawyer for either. The privi-
 49        lege may be waived only in  accordance  with  this  section  and  sections
 50        26-1112 and 67-2743E, Idaho Code.
 51        (d)  The  director of the department of finance or the appropriate officer
 52        or employee of the federal bank or other financial institution  regulatory
                                                                        
                                           16
                                                                        
  1        or supervisory agency may disclose confidential communications between the
  2        department  or  agency and financial institutions to the court, in camera,
  3        in a civil action. Such disclosure shall also be a  privileged  communica-
  4        tion and the privilege may be claimed by the director, officer or employee
  5        or his lawyer.
  6        (e)  No sanction may be imposed upon any financial institution as a result
  7        of  the  claim of a privilege by the financial institution or the director
  8        of the department of finance or the officer or  employee  of  the  federal
  9        supervisory agency under this section.
                                                                        
 10        SECTION  17.  That  Chapter  22, Title 26, Idaho Code, be, and the same is
 11    hereby amended by the addition thereto of a NEW SECTION, to be known and  des-
 12    ignated as Section 26-2226, Idaho Code, and to read as follows:
                                                                        
 13        26-2226.  FALSE  OR  FRAUDULENT  DEBT REDUCTION AND ELIMINATION PRACTICES.
 14    (1) No person shall obtain or attempt to obtain a fee, compensation or consid-
 15    eration from a person through a false or fraudulent representation  or  state-
 16    ment  that  a debt, loan, or extension of credit could or would be eliminated,
 17    reduced or substituted, if the representation or statement is  false  or  mis-
 18    leading  or  has  the  tendency or capacity to be misleading, or if the person
 19    making the representation or statement does not  have  sufficient  information
 20    upon which a reasonable belief in the truth of the representation or statement
 21    could be based.
 22        (2)  (a)  Whenever  it  appears to the director that a person has violated
 23        subsection (1) of this section, the director shall  have  the  powers  and
 24        remedies set forth in sections 67-2754 and 67-2755, Idaho Code, as well as
 25        the powers and remedies found in this chapter, as to any such violation.
 26        (b)  Any  person who violates subsection (1) of this section shall be sub-
 27        ject to the criminal proceedings  and  penalties  set  forth  in  sections
 28        67-2757, 67-2758 and 67-2759, Idaho Code, as well as the criminal proceed-
 29        ings and penalties provided in this chapter.
                                                                        
 30        SECTION  18.  That Section 26-2501, Idaho Code, be, and the same is hereby
 31    amended to read as follows:
                                                                        
 32        26-2501.  DEFINITION. "Loan broker" means any person,  corporation,  part-
 33    nership or other business entity which offers for compensation, in this state,
 34    to  arrange  for a loan or other extension of credit. "Loan broker" includes a
 35    person, corporation, partnership or other business entity which, for compensa-
 36    tion or for no compensation, advertises, solicits, or offers  to  make  or  to
 37    obtain for others a loan or other extension of credit.
                                                                        
 38        SECTION  19.  That Section 26-2505, Idaho Code, be, and the same is hereby
 39    amended to read as follows:
                                                                        
 40        26-2505.  ADMINISTRATION -- ENFORCEMENT -- ACTIONS  FOR  MONETARY  RELIEF.
 41    (1)  The  director  of the Idaho department of finance shall have the power to
 42    administer and enforce the provisions of this chapter. Whenever it appears  to
 43    the  director that a loan broker has violated section 26-2503, Idaho Code, the
 44    director shall have the powers and remedies set  forth  in  sections  67-2754,
 45    67-2755, 67-2757, 67-2758 and 67-2759, Idaho Code.
 46        (2)  The  receiving  of  any fee, interest or other charge in violation of
 47    this chapter shall also be deemed an unfair and deceptive practice  in  viola-
 48    tion  of  the  Idaho  Cconsumer  Pprotection Aact; provided however, no person
 49    aggrieved by a violation of this chapter can recover  or  attempt  to  recover
                                                                        
                                           17
                                                                        
  1    monetary  relief  under  both this chapter and the Idaho Cconsumer Pprotection
  2    Aact, but rather such person must elect whether to file an action pursuant  to
  3    this chapter or the Idaho Cconsumer Pprotection Aact.
                                                                        
  4        SECTION 20.  SEVERABILITY.  The provisions of this act are hereby declared
  5    to  be  severable  and if any provision of this act or the application of such
  6    provision to any person or circumstance is declared invalid  for  any  reason,
  7    such  declaration  shall  not affect the validity of the remaining portions of
  8    this act.

Statement of Purpose / Fiscal Impact


                     STATEMENT  OF  PURPOSE

                           RS 14452C3

Idaho's financial institutions, other industries regulated by the
Department of Finance, and their customers are subjected to large
losses each year due to fraud.  Although the fraud is typically a
crime, often it is not prosecuted.  The Department is proposing the
Financial Fraud Prevention Act to authorize the Department to
investigate and bring civil enforcement actions against persons who
perpetrate fraud against financial institutions, including non-
depository institutions, and their customers.  The law would also
allow referral of actions to criminal law enforcement agencies. 
The legislaton also proposes to move the provisions relating to the
Continuing-Care Disclosure Act, a law administered by the
Department, from Title 67, Idaho Code, to Title 26, which contains
the majority of the remainder of the laws administered by the
Department. 


                           FISCAL NOTE

There will be no immediate fiscal impact to the General Fund.  If
the bill passes, the Department of Finance plans to utilize
existing staff to administer the law.  However, it is anticipated
that in time there will be a need to add an additional
investigator, funded by the Department's dedicated fund, to
effectively administer this law.


CONTACT           
Name:     Mary Hughes
Agency:   Finance, Dept. of
Phone:    208-332-8030

STATEMENT OF PURPOSE/FISCAL NOTE                      H 88