OLAF Proposed IOTA Changes

8/14/2019 OLAF Proposed IOTA Changes

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Sec. 3953.23. (A) Every title insurance agent shall keep books of account and record andvouchers pertaining to the business of title insurance in such manner that the title

insurance company may readily ascertain from time to time whether the agent has

complied with this chapter.(B)(1) A title insurance agent may engage in the business of handling escrows of real

property transactions provided that subject to all of the following:(a) The agent shall maintain a separate record of all receipts and disbursements of escrowfunds and shall not.

(b) The agent shall deposit funds held in trust at interest in either of the following

accounts:

(i) An account as required in section 3953.231 of the Revised Code and in accordancewith all applicable rules;

(ii) A separate escrow account for the benefit of one or more parties to the escrow

transaction.(c) The agent shall not commingle any such funds with the agent's own funds or with

funds held by the agent in any other capacity; and if.

(d) The agent shall ensure that any person or entity delegated or assigned by the agentwith the responsibility for handling escrows of real property transactions complies with

all provisions of the Revised Code and any rules that are applicable to the agent.

(e) If at any time the superintendent of insurance determines that an agent has failed to

comply with any of the provisions of this section, the superintendent may revoke thelicense of the agent pursuant to section 3905.14 of the Revised Code, subject to review as

provided for in Chapter 119. of the Revised Code.

(C) All title insurance agents or agencies that handle escrows in real property transactionsnot involving the issuance of title insurance shall have coverage that protects the parties

to such transactions against theft, misappropriation, fraud, or any other failure to properlydisburse settlement, closing, or escrow funds. The superintendent shall adopt rules under

Chapter 119. of the Revised Code setting forth the minimum requirements for such

coverage, including, but not limited to, the minimum amounts, terms, and conditions ofsuch coverage.

(D) The superintendent shall require every title insurance agent or agency and any

subcontractors to maintain an errors and omissions policy, in any amount exceedingminimum limits established by the superintendent, that includes but is not limited to

coverage for the agent's or agency's delegation of any agent or agency function. The

superintendent shall adopt rules under Chapter 119. of the Revised Code setting forth the

minimum requirements for that coverage, including but not limited to the minimumamounts, terms, and conditions of the coverage.

Sec. 3953.231. (A)(1) Each title insurance agent or title insurance company shall

establish and maintain an interest-bearing trust account for the deposit of all non-directedescrow funds that meet the requirements of sections 1349.20 to 1349.22 of the Revised

Code received by the agent to affect an escrow transaction.

(2) The account established under division (A)(1) of this section shall be established andmaintained in any federally insured bank, savings and loan association, credit union, or

savings bank that is authorized to transact business in this state an eligible depository.

(3) The Each account established under division (A)(1) of this section shall be in thename of the title insurance agent or company, and shall be identified as an "interest on


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trust account" or "IOTA." The name of the account may contain additional identifyinginformation to distinguish it from other accounts.

(4) The title insurance agent or company establishing the account shall submit, in writing,

to the superintendent of insurance the name, account number, and location of the bank,savings and loan association, credit union, or savings bank eligible depository in which

the trust account is maintained.(B) Each title insurance agent or company shall deposit all non-directed escrow fundsthat are nominal in amount or are to be held for a short period of time into the account

established under division (A) of this section no later than the next business day after

receipt.

(C) Each account established under division (A) of this section shall comply with all ofthe following:

(1) All funds in the shall be deposited into an IOTA account product at an eligible

depository and shall be subject to withdrawal or transfer upon request and without delay,or as soon as permitted by law;

(2) The rate of interest payable on the account shall not be less than the rate paid by the

bank, savings and loan, credit union, or savings bank to its regular depositors. The ratemay be higher if there is no impairment of the right to the immediate withdrawal or

transfer of the principal; (a) The approved rate of interest payable on the account shall

equal or exceed the highest interest rate or dividend paid by the eligible depository on its

account products that are not IOTA account products. The eligible depository shall payon its IOTA account product any higher rates offered by it on its account products that

are not IOTA account products.

(b) In paying not less than the highest interest rate or dividend paid by the eligibledepository on its account products that are not IOTA account products, an eligible

depository shall do both of the following:(i) For IOTA accounts with balances of less than one hundred thousand dollars, pay a rate

that equals or exceeds the highest rate paid on its business checking account paying

preferred interest rates, such as money market or indexed rates, or any other similar,suitable interest-bearing account offered by the eligible depository on its account

products that are not IOTA account products;

(ii) For IOTA accounts with balances of one hundred thousand dollars or more, pay a ratethat equals or exceeds the highest rate paid on its business checking account with an

automated investment feature, such as an overnight sweep account, business investment

or other similar premium checking account, short-term jumbo certificate of deposit,

money market account, or any other similar, suitable interest-bearing account offered bythe eligible depository on its account products that are not IOTA account products.

(c) In determining the highest interest rate or dividend paid by the eligible depository on

its account products that are not IOTA account products, an eligible depository shallconsider the rates it offers its customers from internal rate sheets or through preferred or

negotiated rates on a per customer basis. In considering the rate for the IOTA account

product, the eligible depository may also take into consideration and discount for factorssuch as fees paid by the account-holder, time commitments, and withdrawal limitations.

The eligible depository shall not use these factors to preclude the consideration of the

rates paid on one or more of its account products that are not IOTA account products inthe eligible depository's establishment of a rate for the IOTA account product.


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(d) If an eligible depository determines that it is unable to pay the approved rate duringany reporting period, the eligible depository may request from the Ohio legal assistance

foundation a waiver from the approved rate requirement for that reporting period. If an

eligible depository requests a waiver from the approved rate requirement, the eligibledepository shall demonstrate in the form and manner prescribed in rules adopted by the

Ohio legal assistance foundation pursuant to section 120.52 of the Revised Code that therates of interest paid on its IOTA account product are generally not less than the highestrates paid by the eligible depository on its account products that are not IOTA account

products. At a minimum, the eligible depository shall demonstrate by an independent,

third-party auditor's certification that not more than five per cent of the eligible

depository's account products that are not IOTA account products with an average dailybalance of greater than or equal to one hundred thousand dollars have rates that are

higher than the rate paid on the its IOTA account product during the same reporting

period.(3) All interest earned on the an account, net of service charges and other related charges,

established under division (A)(1) of this section shall be transmitted to the treasurer of

state for deposit in the legal aid fund established under section 120.52 of the RevisedCode. No part of the interest earned on funds deposited in an interest-bearing trust

account established under division (A) of this section shall be paid to, or inure to the

benefit of, the title insurance agent or company, the client or other person who owns or

has a beneficial ownership of the funds deposited, or any other account, person, or entityother than in accordance with this section and sections 120.51 to 120.55 of the Revised

Code.

(D) The title insurance agent or company establishing an account under division (A) ofthis section shall direct the bank, savings and loan association, credit union, or savings

bank eligible depository to do both all of the following:(1) Remit by the fifteenth day of each month interest or dividends on the average monthly

balance in the account earned in the preceding month, or as otherwise computed in

accordance with the standard accounting practice of the bank, savings and loanassociation, credit union, or savings bank, less reasonable service charges and other

related charges, eligible depository, to the treasurer of state at least quarterly for deposit

in the legal aid fund established under section 120.52 of the Revised Code;(2) At the time of each remittance, transmit to the treasurer of state, and if requested, to

the Ohio legal assistance foundation, and, if requested, to the title insurance agent or

company, a statement showing the name of the title insurance agent or company for

whom the remittance is sent, the comparable accounts or product types and the rates paidas required in division (C)(2)(b) of this section, the rate of interest applied, the accounting

period, the net amount remitted to the treasurer of state for each account, the total

remitted, the average account balance for each month of the period for which the report ismade, and the amount deducted for of service charges and other related charges assessed

to and paid by the account holder or other party.

(3) Notify the superintendent or other entity designated by the superintendent on eachoccasion when a properly payable instrument is presented for payment from the account

and the account contains insufficient funds, provide this notice without regard to whether

the instrument is honored by the eligible depository, provide this notice by electronic or


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other means within five banking days of the date that the instrument was honored orreturned as dishonored, and include in the notice all of the following:

(a) The name and address of the eligible depository;

(b) The name and address of the title insurance agent or company that maintains theaccount;

(c) The account number and either the amount of the overdraft and the date issued or theamount of the dishonored instrument and the date returned.(E) The statements and reports submitted by the bank, savings and loan association,

credit union, or savings bank eligible depository under this section, are confidential and

are not public records subject to section 149.43 of the Revised Code and shall be used

only by the Ohio legal assistance foundation to administer the legal aid fund and by thesuperintendent for the enforcement of this section. If any statement or report submitted by

an eligible depository under this section is used by the superintendent for the enforcement

of this section, that statement or report may become a public record subject to section149.43 of the Revised Code.

(F) No funds belonging to a title insurance agent or company shall be deposited into an

account established under division (A) of this section except funds necessary to establishthe account or to pay service charges and other related charges of the bank, savings and

loan association, credit union, or savings bank that are in excess of earnings on the

account eligible depository.

(G) No liability arising out of any negligent act or omission of any title insurance agent orcompany with respect to any account established under division (A) of this section shall

be imputed to the bank, savings and loan association, credit union, or savings bank

eligible depository.(H) No liability or responsibility arising out of any negligent act or omission of any title

insurance agent with respect to any account established under division (A) of this sectionshall be imputed to a title insurance company.

(I) The superintendent may adopt, in accordance with Chapter 119. of the Revised Code,

rules that pertain to the use of accounts established under division (A) of this section andto the enforcement of this section. Any rules adopted by the superintendent under this

division that pertain to the use of accounts established under division (A) of this section

shall conform to the provisions of this section, section 3953.23 of the Revised Code, andany rules adopted by the Ohio legal assistance foundation pursuant to section 120.52 of

the Revised Code.

(I) As used in this section:

(1) "Approved rate" means the minimum allowable rate of interest payable on an IOTAaccount product established and maintained under this section or an IOLTA account

product established and maintained under sections 4705.09 and 4705.10 of the Revised

Code.(2) "Eligible depository" means a depository or financial institution that satisfies all of

the following requirements:

(a) It voluntarily offers and maintains account products pursuant to sections 3953.231,4705.09, and 4705.10 of the Revised Code and meets the requirements prescribed in

those sections and any rules adopted by the Ohio legal assistance foundation pursuant to

section 120.52 of the Revised Code.


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(b) It is a bank, savings bank, or savings and loan association authorized by federal orstate law to do business in this state and insured by the Federal deposit insurance

corporation or any successor insurance corporation or is a credit union authorized by

federal or state law to do business in this state and insured by the national credit unionadministration or by a credit union share guaranty corporation in this state.

(c) It has been certified by the Ohio legal assistance foundation as an eligible depository,based on the criterion provided in sections 120.52, 3953.231, 4705.09, and 4705.10 of theRevised Code, subject to a dispute resolution process established by rules adopted by the

Ohio legal assistance foundation pursuant to section 120.52 of the Revised Code.

(3) "Escrow transaction" means a transaction in which a person, for the purpose of

effecting and closing the sale, purchase, exchange, transfer, encumbrance, or lease of aninterest in commercial or residential real property located in this state to another person,

provides a written instrument or document, money, negotiable instrument, check,

evidence of title to real property, or anything of value to an escrow or closing agent to beheld by the agent until a specified event occurs or until the performance of a prescribed

condition, at which time the agent shall deliver it to a specific person in compliance with

applicable instructions by filing that written instrument or document with the appropriatepublic entity or by direct tender to the appropriate person.

(4) "IOTA account product" means a separate and unique product offered by an eligible

depository that is used exclusively for the deposit of funds transferred electronically or

otherwise, cash, money orders, or negotiable instruments that are received by a titleinsurance agent to effect an escrow transaction and fully complies with the account

requirements of sections 120.52, 3953.23, and 3953.231 of the Revised Code.

Documents

OLAF Proposed IOTA Changes