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Banks, Legislature back deregulated interest rates


Mississippi bankers can check another item off their to-do list with the passage of legislation that ensures banks and their customers can operate under deregulated interest rates.

At press time, the legislation had passed both houses and was on its way to the governor’s desk. If signed by Gov. Ronnie Musgrove, the bill removes a repealer in the current law, commonly called the usury law, to make permanent the deregulation of interest rates on all loans over $2,000. The current law, with the repealer, has been in effect since 1989.

“This was our No. 1 priority this year,” said Chad Driskell, governmental affairs director for the Mississippi Bankers Association (MBA). “With the competitive market we’re in now, we can’t operate in a situation of regulated interest rates.”

Lewis F. Mallory Jr., chairman and CEO of Starkville’s NBC Capital Corp., said he was optimistic the bill would pass without the repealer.

“This is an important one to the banking industry and to the credit industry,” he said. “I think possible concerns that may have existed that lenders might take advantage of borrowers have been pretty well allayed. The market will set the rate for loans and if lenders aren’t competitive, they aren’t going to get loan business.”

Curt Gabardi, president and CEO of Union Planters Bank of Central Mississippi, also supported the legislation. The usury law allows banks to match price and credit, so that banks can appropriately price relative to credit risk and drive down the price for those that maintain exceptional credit, he said.

“If someone comes in with a high score, we can give them the benefit of a better rate,” said Gabardi. “If we have a limitation, that person doesn’t benefit from good credit, and people with less credit don’t have incentive to move up the credit curve,” he said.

In addition to the usury law, Community Bancshares of Mississippi Inc. is following Senate Bill No. 2141, which would change a holding company’s requirements in acquisitions, said John Arledge, senior vice president of marketing for Community.

Current law mandates that a bank holding company that acquires 5% or more of a bank must acquire the majority within six months. The new legislation would change that law so that bank holding companies could acquire up to 25% of another bank without being required to gain control of the bank.

“This is of interest to us because we’re a holding company — one of the first holding companies in Mississippi — and we’ve started banks in other markets,” said Arledge.

At press time, the legislation had passed the Senate.

Also of interest to the banking industry is legislation that would revise Article 9 of the Uniform Commercial Code, said Driskell, which deals with security interest. The revision would make it easier for lenders to protect their loans on items like tractors and computers.

“If you borrow money for a piece of real property like a house, a lender will take a deed of trust. But, if you can’t take a deed or don’t have a provision that provides for a title, then you have to take a security interest. This revision will make it easier to do that,” he said.

In the five years that Driskell has worked the Capitol for the MBA, the biggest change for bankers has been their entrance into the insurance business. After the U.S. Supreme Court ruled in 1996 that federally-chartered banks could sell insurance in towns with a population of 5,000 or less, Mississippi legislators passed the Bank Parity Act in 1997 to give state-chartered banks the same privilege.

“The issue at hand was insurance, but it wasn’t so much about insurance as maintaining a level playing field between state and national banks,” said Driskell. “Even national banks supported it, because it was the right thing to do for the industry.”

Since the Supreme Court ruling, Mississippi is seeing more and more banks acquire insurance agencies around the state, said Mallory. His own company acquired Galloway-Chandler-McKinney Insurance Agency in 1999 and Heritage Insurance Agency in 2000. The two operate under the Galloway name.

“There’s a great consolidation taking place in the financial services industry in our state,” said Mallory.

Contact MBJ Staff Writer Kelly Russell Ingebretsen at kelly@msbusiness.com or (601) 364-1027.


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