STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6115

January 10, 1983

CONSTITUTIONAL LAW:

Const 1963, art 4, Sec. 43--vote needed to enact amendment to banking legislation

LEGISLATURE:

Vote needed to enact amendment to banking legislation

Legislation purporting to amend a law enacted to regulate the banking business may only be enacted by two-thirds vote of the members elected to and serving in each house of the Legislature in accordance with Const 1963, art 4, Sec. 43.

Legislation which would purport to amend a statutory provision regulating the activities of a number of lenders generally, and not banking institutions exclusively, may be enacted by a majority vote of the members elected to and serving in each house of the Legislature.

Honorable H. Lynn Jondahl

State Representative

The Capitol

Lansing, Michigan

You have requested my opinion on the following two questions with regard to HB 4855, which amends the state usury laws:

Your questions involve the application of Const 1963, art 4, Sec. 43, which provides as follows:

HB 4855 contains various proposed amendments to 1966 PA 326; MCLA 438.31 et seq; MSA 19.15(1) et seq, regulating the activities of financial institutions. Proposed Section 1a would amend 1966 PA 326, supra, Sec. 1a, as amended, so as to exclude banks from the requirement therein that closing costs and other loan related fees be 'reasonable and necessary.' The proposed amendment to 1966 PA 326, supra, Sec. 1b, would exclude banks from the requirement that a detailed settlement statement be provided to the borrower at closing. HB 4855 would also add Section 1e to 1966 PA 326, supra, to authorize financial institutions, including banks, to 'charge, collect and receive interest and other charges at any rate and in any amount agreed upon between the financial institution and the borrower.' The effects of these provisions of HB 4855 will be examined separately in order to determine whether the two-thirds requirement of Const 1963, art 4, Sec. 43 applies.

As originally enacted, 1966 PA 326, Secs. 1a and 1b, as added by 1968 PA 266, supra, applied to state and national banks only. Subsequent amendments extended its application to insurance companies, 1969 PA 255, and to lenders authorized to make FHA insured loans, 1978 PA 27. Inasmuch as 1968 PA 266 applied to banks only in its original enactment, there was no question that Const 1963, art 4, Sec. 43 was applicable and controlling. Consequently, in passing the bill, each house of the Legislature expressly noted that the bill had passed with an affirmative vote of two-thirds of the members elected to and serving in each house. See 1 SJ 676 (1968) and 2 HJ 1352 (1968). Despite the fact that 1966 PA 326 Secs. 1a and 1b, supra, were subsequently amended on at least two occasions to extend their application to other types of lenders, the effect of the law continues to be to regulate banking business, as was the original understanding and intent of the Legislature. Consequently, any attempt to amend or repeal this law which originally dealt exclusively with the business of banking must comply with the mandate of Const 1963, art 4, Sec. 43.

It is my opinion, therefore, that proposed sections 1a and 1b of HB 4855 may be enacted only upon an affirmative vote of two-thirds of the members elected to and serving in each house of the Legislature. HB 4855, Sec. 1e(1), would amend the existing usury laws to permit 'a financial institution' to charge any rate of interest. A 'financial institution' is defined in section 1e(2) of HB 4855 as a 'state or national bank, a state or federal savings and loan association, a state or federal credit union, and a licensee under Act No. 21 of Public Acts of 1939, as amended, being Section 493.1 to 493.226 of the Michigan Compiled Laws.'

Whether an amendment to the state's usury laws which applies not only to banks but to other financial institutions is subject to the two-thirds requirement of Const 1963, art 4, Sec. 43, was answered in a letter opinion to Senator John T. Bowman, dated March 19, 1969. That opinion preceded an amendment to the state's usury laws which authorized banks and other lenders to receive any rate of interest on loans secured by first liens on residential real property. This opinion concluded that the intent of Const 1963, art 4, Sec. 43 was to 'provide for the incorporation of banking institutions or regulate the business of such institutions.' A similar letter opinion to Senator Fitzgerald and Senator Lodge, dated March 11, 1971, addressed the question whether an amendment to the state corporation act to permit the formation of bank holding companies was a banking law requiring a vote of two-thirds of the Legislature. In finding in the negative, the opinion reasoned that 'the extraordinary majority requirement of Article IV, Section 43 of the Constitution is only required where the banking law itself or a statute specifically regulating its business is involved.' In reviewing the opinions of March 19, 1969 and March 11, 1971, I find no subsequent case law or other reason to alter the conclusions expressed therein.

Section 1e(2) of HB 4855 applies to numerous regulated lenders. As such it is similar to other statutes which affect the banking business, such as statutes dealing with the perfection of liens, commercial transactions, consumer protection, electronic funds transfer and contracts which have never been construed as requiring the affirmative vote of two-thirds of the members elected to and serving in each house of the Legislature. Thus, a law which is intended to regulate the activities of a number of lenders generally, and not banking institutions exclusively, is not within the purview of Const 1963, art 4, Sec. 43.

It is my opinion, therefore, that proposed section 1e(2) of HB 4855, even though it includes a state or national bank within its terms, may be enacted by a majority vote of the members elected to and serving in each house of the Legislature.

Inasmuch as section 1e(2) of HB 4855 may be given effect without a two-thirds vote of the members elected to and serving in both houses of the Legislature, it is unnecessary to address your second question.

Frank J. Kelley