On April 4, Kentucky enacted HB 88, which will amend laws related to unlawful trade practices, and prohibit entities that are not banks or trust companies from:
- suggesting that they are engaged in banking or trust activities; and
- using the name, trademark, logo, or symbol of any financial institution or any marks that resemble those of any financial institution (except where such use has been consented to “in written or electronic format”).
HB 88 also seeks to “establish guidelines and restrictions for service agreements in residential real estate transactions to provide clarity and structure in these dealings.” The act specifies that service agreements related to residential real property cannot establish rights or duties that extend more than two years beyond their start date. Furthermore, unless exceptions apply, such agreements cannot:
- be binding on future owners of the property;
- impose a lien, encumbrance, or other real property interest on the property;
- require or permit recording of the agreement;
- restrict the resolution of disputes to binding arbitration;
- waive the owner’s rights to class action relief; or
- allow transfer of the service provider’s rights to someone else without the written agreement of the owner.
Putting it into Practice: Non-bank entities operating in Kentucky are encouraged to review and enhance their compliance programs to align with the new law’s requirements on marketing practices. Moreover, Kentucky’s regulations on service providers is more focused on real estate brokers and follows soon after the National Association of Realtors’ recent proposed settlement, which still faces judicial approval.