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| 5 | 5 | | 2025 -- H 5332 |
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| 6 | 6 | | ======== |
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| 7 | 7 | | LC001239 |
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| 8 | 8 | | ======== |
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| 9 | 9 | | S T A T E O F R H O D E I S L A N D |
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| 10 | 10 | | IN GENERAL ASSEMBLY |
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| 11 | 11 | | JANUARY SESSION, A.D. 2025 |
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| 12 | 12 | | ____________ |
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| 13 | 13 | | |
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| 14 | 14 | | A N A C T |
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| 15 | 15 | | RELATING TO FINANCIAL INSTITUTIONS -- THE RHODE ISLAND SPECIAL DEPOSITS |
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| 16 | 16 | | ACT |
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| 17 | 17 | | Introduced By: Representative Jason Knight |
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| 18 | 18 | | Date Introduced: February 07, 2025 |
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| 19 | 19 | | Referred To: House Corporations |
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| 20 | 20 | | |
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| 21 | 21 | | |
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| 22 | 22 | | It is enacted by the General Assembly as follows: |
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| 23 | 23 | | SECTION 1. Title 19 of the General Laws entitled "FINANCIAL INSTITUTIONS" is 1 |
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| 24 | 24 | | hereby amended by adding thereto the following chapter: 2 |
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| 25 | 25 | | CHAPTER 35 3 |
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| 26 | 26 | | THE RHODE ISLAND SPECIAL DEPOSITS ACT 4 |
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| 27 | 27 | | 19-35-1. Short title. 5 |
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| 28 | 28 | | This chapter shall be known and may be cited as the "Uniform Special Deposits Act." 6 |
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| 29 | 29 | | 19-35-2. Definitions. 7 |
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| 30 | 30 | | As used in this chapter, the following words and terms have the following meanings: 8 |
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| 31 | 31 | | (1) "Account agreement" means an agreement that: 9 |
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| 32 | 32 | | (i) Is in a record between a bank and one or more depositors; 10 |
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| 33 | 33 | | (ii) May have one or more beneficiaries as additional parties; and 11 |
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| 34 | 34 | | (iii) States the intention of the parties to establish a special deposit governed by this chapter. 12 |
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| 35 | 35 | | (2) "Bank" means a person engaged in the business of banking and includes a savings bank, 13 |
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| 36 | 36 | | savings and loan association, credit union, trust company, other financial institution as defined in 14 |
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| 37 | 37 | | this title, and other regulated institution as defined in this title. Each branch or separate office of a 15 |
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| 38 | 38 | | bank is a separate bank for the purpose of this chapter. 16 |
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| 39 | 39 | | (3) "Beneficiary" means a person that: 17 |
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| 40 | 40 | | (i) Is identified as a beneficiary in an account agreement; or 18 |
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| 41 | 41 | | |
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| 42 | 42 | | |
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| 43 | 43 | | LC001239 - Page 2 of 9 |
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| 44 | 44 | | (ii) If not identified as a beneficiary in an account agreement, may be entitled to payment 1 |
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| 45 | 45 | | from a special deposit: 2 |
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| 46 | 46 | | (A) Under the account agreement; or 3 |
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| 47 | 47 | | (B) On termination of the special deposit. 4 |
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| 48 | 48 | | (4) "Contingency" means an event or circumstance stated in an account agreement that is 5 |
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| 49 | 49 | | not certain to occur but must occur before the bank is obligated to pay a beneficiary. 6 |
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| 50 | 50 | | (5) "Creditor process" means attachment, garnishment, levy, notice of lien, sequestration, 7 |
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| 51 | 51 | | or similar process issued by or on behalf of a creditor or other claimant. 8 |
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| 52 | 52 | | (6) "Depositor" means a person that establishes or funds a special deposit. 9 |
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| 53 | 53 | | (7) "Good faith" means honesty in fact and observance of reasonable commercial standards 10 |
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| 54 | 54 | | of fair dealing. 11 |
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| 55 | 55 | | (8) "Knowledge" of a fact means: 12 |
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| 56 | 56 | | (i) With respect to a beneficiary, actual knowledge of the fact; or 13 |
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| 57 | 57 | | (ii) With respect to a bank holding a special deposit: 14 |
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| 58 | 58 | | (A) If the bank: 15 |
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| 59 | 59 | | (I) Has established a reasonable routine for communicating material information to an 16 |
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| 60 | 60 | | individual to whom the bank has assigned responsibility for the special deposit; and 17 |
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| 61 | 61 | | (II) Maintains reasonable compliance with the routine, actual knowledge of the fact by that 18 |
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| 62 | 62 | | individual; or 19 |
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| 63 | 63 | | (B) If the bank has not established and maintained reasonable compliance with a routine 20 |
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| 64 | 64 | | described in subsection (8)(ii)(A)(I) of this section or otherwise exercised due diligence, implied 21 |
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| 65 | 65 | | knowledge of the fact that would have come to the attention of an individual to whom the bank has 22 |
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| 66 | 66 | | assigned responsibility for the special deposit. 23 |
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| 67 | 67 | | (9) "Obligated to pay a beneficiary" or "obligation to pay a beneficiary" means a 24 |
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| 68 | 68 | | beneficiary is entitled under the account agreement to receive from the bank a payment when: 25 |
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| 69 | 69 | | (i) A contingency has occurred; and 26 |
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| 70 | 70 | | (ii) The bank has knowledge the contingency has occurred. 27 |
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| 71 | 71 | | (10) "Permissible purpose" means a governmental, regulatory, commercial, charitable, or 28 |
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| 72 | 72 | | testamentary objective of the parties stated in an account agreement. The term includes an objective 29 |
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| 73 | 73 | | to: 30 |
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| 74 | 74 | | (i) Hold funds: 31 |
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| 75 | 75 | | (A) In escrow, including for a purchase and sale, lease, buyback, or other transaction; 32 |
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| 76 | 76 | | (B) As a security deposit of a tenant; 33 |
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| 77 | 77 | | (C) That may be distributed to a person as remuneration, retirement or other benefit, or 34 |
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| 78 | 78 | | |
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| 79 | 79 | | |
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| 80 | 80 | | LC001239 - Page 3 of 9 |
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| 81 | 81 | | compensation under a judgment, consent decree, court order, or other decision of a tribunal; or 1 |
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| 82 | 82 | | (D) For distribution to a defined class of persons after identification of the class members 2 |
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| 83 | 83 | | and their interest in the funds; 3 |
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| 84 | 84 | | (ii) Provide assurance with respect to an obligation created by contract, such as earnest 4 |
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| 85 | 85 | | money to ensure a transaction closes; 5 |
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| 86 | 86 | | (iii) Settle an obligation that arises in the operation of a payment system, securities 6 |
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| 87 | 87 | | settlement system, or other financial market infrastructure; 7 |
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| 88 | 88 | | (iv) Provide assurance with respect to an obligation that arises in the operation of a payment 8 |
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| 89 | 89 | | system, securities settlement system, or other financial market infrastructure; or 9 |
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| 90 | 90 | | (v) Hold margin, other cash collateral, or funds that support the orderly functioning of 10 |
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| 91 | 91 | | financial market infrastructure or the performance of an obligation with respect to the 11 |
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| 92 | 92 | | infrastructure. 12 |
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| 93 | 93 | | (11) "Person" means an individual, estate, business or nonprofit entity, government or 13 |
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| 94 | 94 | | governmental subdivision, agency, or instrumentality, or other legal entity. The term includes a 14 |
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| 95 | 95 | | protected series, however denominated, of an entity if the protected series is established under law 15 |
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| 96 | 96 | | that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of the 16 |
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| 97 | 97 | | entity or of any other protected series of the entity to satisfy a claim from assets of the protected 17 |
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| 98 | 98 | | series. 18 |
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| 99 | 99 | | (12) "Record" means information: 19 |
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| 100 | 100 | | (i) Inscribed on a tangible medium; or 20 |
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| 101 | 101 | | (ii) Stored in an electronic or other medium and retrievable in perceivable form. 21 |
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| 102 | 102 | | (13) "Special deposit" means a deposit that satisfies §19-35-5. 22 |
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| 103 | 103 | | (14) "State" means a state of the United States, the District of Columbia, Puerto Rico, the 23 |
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| 104 | 104 | | United States Virgin Islands, or any other territory or possession subject to the jurisdiction of the 24 |
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| 105 | 105 | | United States. The term includes an agency or instrumentality of the state. 25 |
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| 106 | 106 | | 19-35-3. Scope, choice of law, and forum. 26 |
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| 107 | 107 | | (a) This chapter applies to a special deposit under an account agreement that states the 27 |
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| 108 | 108 | | intention of the parties to establish a special deposit governed by this chapter, regardless of whether 28 |
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| 109 | 109 | | a party to the account agreement or a transaction related to the special deposit, or the special deposit 29 |
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| 110 | 110 | | itself, has a reasonable relation to this state. 30 |
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| 111 | 111 | | (b) The parties to an account agreement may choose a forum in this state for settling a 31 |
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| 112 | 112 | | dispute arising out of the special deposit, regardless of whether a party to the account agreement or 32 |
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| 113 | 113 | | a transaction related to the special deposit, or the special deposit itself, has a reasonable relation to 33 |
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| 114 | 114 | | this state. 34 |
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| 115 | 115 | | |
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| 116 | 116 | | |
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| 117 | 117 | | LC001239 - Page 4 of 9 |
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| 118 | 118 | | (c) This chapter does not affect: 1 |
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| 119 | 119 | | (1) A right or obligation relating to a deposit other than a special deposit under this chapter; 2 |
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| 120 | 120 | | or 3 |
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| 121 | 121 | | (2) The voidability of a deposit or transfer that is fraudulent or voidable under other law. 4 |
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| 122 | 122 | | 19-35-4. Variation by agreement or amendment. 5 |
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| 123 | 123 | | (a) The effect of §§ 19-35-2 through 19-35-6, §§ 19-35-8 through 19-35-11, and § 19-35-6 |
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| 124 | 124 | | 14 shall not be varied by agreement, except as provided in those sections. Subject to subsection (b) 7 |
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| 125 | 125 | | of this section, the effect of §§ 19-35-7, 19-35-12, and 19-35-13 may be varied by agreement. 8 |
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| 126 | 126 | | (b) A provision in an account agreement or other record that substantially excuses liability 9 |
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| 127 | 127 | | or substantially limits remedies for failure to perform an obligation under this chapter is not 10 |
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| 128 | 128 | | sufficient to vary the effect of a provision of this chapter. 11 |
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| 129 | 129 | | (c) If a beneficiary is a party to an account agreement, the bank and the depositor may 12 |
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| 130 | 130 | | amend the agreement without the consent of the beneficiary only if the agreement expressly permits 13 |
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| 131 | 131 | | the amendment. 14 |
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| 132 | 132 | | (d) If a beneficiary is not a party to an account agreement and the bank and the depositor 15 |
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| 133 | 133 | | know the beneficiary has knowledge of the agreement's terms, the bank and the depositor may 16 |
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| 134 | 134 | | amend the agreement without the consent of the beneficiary only if the amendment does not 17 |
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| 135 | 135 | | adversely and materially affect a payment right of the beneficiary. 18 |
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| 136 | 136 | | (e) If a beneficiary is not a party to an account agreement and the bank and the depositor 19 |
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| 137 | 137 | | do not know whether the beneficiary has knowledge of the agreement's terms, the bank and the 20 |
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| 138 | 138 | | depositor may amend the agreement without the consent of the beneficiary only if the amendment 21 |
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| 139 | 139 | | is made in good faith. 22 |
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| 140 | 140 | | 19-35-5. Requirements for special deposit. 23 |
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| 141 | 141 | | A deposit is a special deposit if it is: 24 |
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| 142 | 142 | | (1) A deposit of funds in a bank under an account agreement; 25 |
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| 143 | 143 | | (2) For the benefit of at least two (2) beneficiaries, one or more of which may be a 26 |
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| 144 | 144 | | depositor; 27 |
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| 145 | 145 | | (3) Denominated in a medium of exchange that is currently authorized or adopted by a 28 |
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| 146 | 146 | | domestic or foreign government; 29 |
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| 147 | 147 | | (4) For a permissible purpose stated in the account agreement; and 30 |
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| 148 | 148 | | (5) Subject to a contingency. 31 |
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| 149 | 149 | | 19-35-6. Permissible purpose. 32 |
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| 150 | 150 | | (a) A special deposit shall serve at least one permissible purpose stated in the account 33 |
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| 151 | 151 | | agreement from the time the special deposit is created in the account agreement until termination 34 |
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| 152 | 152 | | |
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| 153 | 153 | | |
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| 154 | 154 | | LC001239 - Page 5 of 9 |
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| 155 | 155 | | of the special deposit. 1 |
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| 156 | 156 | | (b) If, before termination of the special deposit, the bank or a court determines the special 2 |
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| 157 | 157 | | deposit no longer satisfies subsection (a) of this section, §§ 19-35-8 through 19-35-11 cease to 3 |
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| 158 | 158 | | apply to any funds deposited in the special deposit after the special deposit ceases to satisfy 4 |
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| 159 | 159 | | subsection (a) of this section. 5 |
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| 160 | 160 | | (c) If, before termination of a special deposit, the bank determines the special deposit no 6 |
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| 161 | 161 | | longer satisfies subsection (a) of this section, the bank may take action it believes is necessary under 7 |
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| 162 | 162 | | the circumstances, including terminating the special deposit. 8 |
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| 163 | 163 | | 19-35-7. Payment to beneficiary by bank. 9 |
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| 164 | 164 | | (a) Unless the account agreement provides otherwise, the bank is obligated to pay a 10 |
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| 165 | 165 | | beneficiary if there are sufficient actually and finally collected funds in the balance of the special 11 |
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| 166 | 166 | | deposit. 12 |
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| 167 | 167 | | (b) Except as provided in subsection (c) of this section, the obligation to pay the beneficiary 13 |
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| 168 | 168 | | is excused if the funds available in the special deposit are insufficient to cover such payment. 14 |
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| 169 | 169 | | (c) Unless the account agreement provides otherwise, if the funds available in the special 15 |
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| 170 | 170 | | deposit are insufficient to cover an obligation to pay a beneficiary, a beneficiary may elect to be 16 |
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| 171 | 171 | | paid the funds that are available or, if there is more than one beneficiary, a pro rata share of the 17 |
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| 172 | 172 | | funds available. Payment to the beneficiary making the election under this subsection discharges 18 |
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| 173 | 173 | | the bank's obligation to pay a beneficiary and does not constitute an accord and satisfaction with 19 |
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| 174 | 174 | | respect to another person obligated to the beneficiary. 20 |
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| 175 | 175 | | (d) Unless the account agreement provides otherwise, the obligation of the bank obligated 21 |
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| 176 | 176 | | to pay a beneficiary is immediately due and payable. 22 |
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| 177 | 177 | | (e) The bank may discharge its obligation under this section by: 23 |
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| 178 | 178 | | (1) Crediting another transaction account of the beneficiary; or 24 |
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| 179 | 179 | | (2) Taking other action that: 25 |
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| 180 | 180 | | (i) Is permitted under the account agreement for the bank to obtain a discharge; or 26 |
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| 181 | 181 | | (ii) Otherwise would constitute a discharge under law. 27 |
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| 182 | 182 | | (f) If the bank obligated to pay a beneficiary has incurred an obligation to discharge the 28 |
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| 183 | 183 | | obligation of another person, the obligation of the other person is discharged if action by the bank 29 |
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| 184 | 184 | | under subsection (e) of this section would constitute a discharge of the obligation of the other person 30 |
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| 185 | 185 | | under law that determines whether an obligation is satisfied. 31 |
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| 186 | 186 | | 19-35-8. Property interest of depositor or beneficiary. 32 |
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| 187 | 187 | | (a) Neither a depositor nor a beneficiary has a property interest in a special deposit. 33 |
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| 188 | 188 | | (b) Any property interest with respect to a special deposit is only in the right to receive 34 |
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| 189 | 189 | | |
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| 190 | 190 | | |
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| 191 | 191 | | LC001239 - Page 6 of 9 |
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| 192 | 192 | | payment if the bank is obligated to pay a beneficiary and not in the special deposit itself. Any 1 |
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| 193 | 193 | | property interest under this subsection is determined by this chapter. 2 |
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| 194 | 194 | | 19-35-9. When creditor process is enforceable against bank. 3 |
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| 195 | 195 | | (a) Subject to subsection (b) of this section, creditor process with respect to a special 4 |
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| 196 | 196 | | deposit is not enforceable against the bank holding the special deposit. 5 |
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| 197 | 197 | | (b) Creditor process is enforceable against the bank holding a special deposit with respect 6 |
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| 198 | 198 | | to an amount the bank is obligated to pay a beneficiary or a depositor if the process: 7 |
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| 199 | 199 | | (1) Is served on the bank; 8 |
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| 200 | 200 | | (2) Provides sufficient information to permit the bank to identify the depositor or the 9 |
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| 201 | 201 | | beneficiary from the bank's books and records; and 10 |
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| 202 | 202 | | (3) Gives the bank a reasonable opportunity to act on the process. 11 |
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| 203 | 203 | | (c) Creditor process served on a bank before it is enforceable against the bank under 12 |
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| 204 | 204 | | subsection (b) of this section does not create a right of the creditor against the bank or a duty of the 13 |
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| 205 | 205 | | bank to the creditor. Rhode Island general laws shall determine whether creditor process creates a 14 |
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| 206 | 206 | | lien enforceable against the beneficiary on a contingent interest of a beneficiary, including a 15 |
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| 207 | 207 | | depositor as a beneficiary, even if not enforceable against the bank. 16 |
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| 208 | 208 | | 19-35-10. Injunction or similar relief. 17 |
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| 209 | 209 | | A court may enjoin, or grant similar relief that would have the effect of enjoining, a bank 18 |
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| 210 | 210 | | from paying a depositor or beneficiary only if payment would constitute a material fraud or 19 |
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| 211 | 211 | | facilitate a material fraud with respect to a special deposit. 20 |
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| 212 | 212 | | 19-35-11. Recoupment or set off. 21 |
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| 213 | 213 | | (a) Except as provided in subsections (b) or (c) of this section, a bank may not exercise a 22 |
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| 214 | 214 | | right of recoupment or set off against a special deposit. 23 |
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| 215 | 215 | | (b) An account agreement may authorize the bank to debit the special deposit: 24 |
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| 216 | 216 | | (1) When the bank becomes obligated to pay a beneficiary, in an amount that does not 25 |
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| 217 | 217 | | exceed the amount necessary to discharge the obligation; 26 |
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| 218 | 218 | | (2) For a fee assessed by the bank that relates to an overdraft in the special deposit account; 27 |
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| 219 | 219 | | (3) For costs incurred by the bank that relate directly to the special deposit; or 28 |
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| 220 | 220 | | (4) To reverse an earlier credit posted by the bank to the balance of the special deposit 29 |
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| 221 | 221 | | account, if the reversal occurs under an event or circumstance warranted under Rhode Island 30 |
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| 222 | 222 | | general laws governing mistake and restitution. 31 |
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| 223 | 223 | | (c) The bank holding a special deposit may exercise a right of recoupment or set off against 32 |
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| 224 | 224 | | an obligation to pay a beneficiary, even if the bank funds payment from the special deposit. 33 |
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| 225 | 225 | | 19-35-12. Duties and liability of bank. 34 |
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| 226 | 226 | | |
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| 227 | 227 | | |
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| 228 | 228 | | LC001239 - Page 7 of 9 |
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| 229 | 229 | | (a) A bank does not have a fiduciary duty to any person with respect to a special deposit. 1 |
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| 230 | 230 | | (b) When the bank holding a special deposit becomes obligated to pay a beneficiary, a 2 |
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| 231 | 231 | | debtor-creditor relationship arises between the bank and beneficiary. 3 |
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| 232 | 232 | | (c) The bank holding a special deposit has a duty to a beneficiary to comply with the 4 |
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| 233 | 233 | | account agreement as set forth in this chapter. 5 |
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| 234 | 234 | | (d) If the bank holding a special deposit does not comply with the account agreement as 6 |
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| 235 | 235 | | set forth in this chapter, the bank is liable to a depositor or beneficiary only for damages proximately 7 |
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| 236 | 236 | | caused by the noncompliance. Except as provided by Rhode Island general laws, the bank is not 8 |
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| 237 | 237 | | liable for consequential, special, or punitive damages. 9 |
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| 238 | 238 | | (e) The bank holding a special deposit may rely on records presented in compliance with 10 |
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| 239 | 239 | | the account agreement to determine whether the bank is obligated to pay a beneficiary. 11 |
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| 240 | 240 | | (f) If the account agreement requires payment on presentation of a record, the bank shall 12 |
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| 241 | 241 | | determine within a reasonable time whether the record is sufficient to require payment. If the 13 |
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| 242 | 242 | | agreement requires action by the bank on presentation of a record, the bank is not liable for relying 14 |
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| 243 | 243 | | in good faith on the genuineness of the record if the record appears on its face to be genuine. 15 |
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| 244 | 244 | | (g) Unless the account agreement provides otherwise, the bank is not required to determine 16 |
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| 245 | 245 | | whether a permissible purpose stated in the agreement continues to exist. 17 |
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| 246 | 246 | | 19-35-13. Term and termination. 18 |
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| 247 | 247 | | (a) Unless otherwise provided in the account agreement, a special deposit terminates five 19 |
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| 248 | 248 | | (5) years after the date the special deposit was first funded. 20 |
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| 249 | 249 | | (b) Unless otherwise provided in the account agreement, if the bank cannot identify or 21 |
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| 250 | 250 | | locate a beneficiary entitled to payment when the special deposit is terminated, and a balance 22 |
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| 251 | 251 | | remains in the special deposit, the bank shall pay the balance to the depositor or depositors as a 23 |
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| 252 | 252 | | beneficiary or beneficiaries. 24 |
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| 253 | 253 | | (c) A bank that pays the remaining balance as provided under subsection (b) of this section 25 |
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| 254 | 254 | | has no further obligation with respect to the special deposit. 26 |
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| 255 | 255 | | 19-35-14. Principles of law and equity. 27 |
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| 256 | 256 | | The Rhode Island general laws regarding consumer protection, banking deposits, escheat 28 |
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| 257 | 257 | | and abandoned or unclaimed property, equity, contracts, principal and agent, estoppel, fraud, 29 |
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| 258 | 258 | | misrepresentation, duress, coercion, mistake, and bankruptcy, supplement this chapter except to the 30 |
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| 259 | 259 | | extent that any statute is inconsistent with this chapter. 31 |
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| 260 | 260 | | 19-35-15. Uniformity of application and construction. 32 |
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| 261 | 261 | | In applying and construing this chapter, a court shall consider the promotion of uniformity 33 |
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| 262 | 262 | | of the law among jurisdictions that enact it. 34 |
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| 263 | 263 | | |
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| 264 | 264 | | |
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| 265 | 265 | | LC001239 - Page 8 of 9 |
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| 266 | 266 | | 19-35-16. Transitional provision. 1 |
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| 267 | 267 | | This chapter applies to: 2 |
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| 268 | 268 | | (1) A special deposit made under an account agreement executed on or after the effective 3 |
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| 269 | 269 | | date of this chapter; and 4 |
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| 270 | 270 | | (2) A deposit made under an agreement executed before the effective date of this chapter, 5 |
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| 271 | 271 | | if: 6 |
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| 272 | 272 | | (i) All parties entitled to amend the agreement agree to make the deposit a special deposit 7 |
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| 273 | 273 | | governed by this chapter; and 8 |
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| 274 | 274 | | (ii) The special deposit referenced in the amended agreement satisfies § 19-35-5. 9 |
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| 275 | 275 | | 19-35-17. Severability clause. 10 |
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| 276 | 276 | | If a provision of this chapter or its application to a person or circumstance is held invalid, 11 |
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| 277 | 277 | | the invalidity does not affect any other provision or application of this chapter that can be given 12 |
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| 278 | 278 | | effect without the invalid provision. 13 |
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| 279 | 279 | | SECTION 2. This act shall take effect upon passage. 14 |
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| 280 | 280 | | ======== |
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| 281 | 281 | | LC001239 |
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| 282 | 282 | | ======== |
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| 283 | 283 | | |
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| 284 | 284 | | |
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| 285 | 285 | | LC001239 - Page 9 of 9 |
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| 286 | 286 | | EXPLANATION |
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| 287 | 287 | | BY THE LEGISLATIVE COUNCIL |
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| 288 | 288 | | OF |
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| 289 | 289 | | A N A C T |
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| 290 | 290 | | RELATING TO FINANCIAL INSTITUTIONS -- THE RHODE ISLAND SPECIAL DEPOSITS |
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| 291 | 291 | | ACT |
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| 292 | 292 | | *** |
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| 293 | 293 | | This act would establish the Rhode Island Special Deposits Act to be governed by an 1 |
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| 294 | 294 | | account agreement between the bank and the depositor or its beneficiary. 2 |
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| 295 | 295 | | This act would take effect upon passage. 3 |
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| 296 | 296 | | ======== |
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| 297 | 297 | | LC001239 |
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