Action in Wisconsin


Addressing zombie homes, verbal contracts, DOR sourcing rules

By Rose Oswald Poels

At the behest of its member banks, the Wisconsin Bankers Association (WBA) recently supported four changes to state legislation and regulation that will have a positive impact on Wisconsin’s banking industry.

Wisconsin Act 376—Shorter Redemption Period and Clarification of Abandoned Property Foreclosures. The new law shortens the redemption period during a foreclosure in residential properties to match commercial properties (three months if deficiency is waived and six months if no waiver) and provides a practical solution to the abandoned property or “zombie property” issue. Upon a court-ordered judgment of abandonment, financial institutions would have no more than 12 months to sell the property or release the mortgage.

Authored by a freshman legislator who is a former bank CEO, the law is designed to address the lingering foreclosure crisis by speeding up the foreclosure process for many properties. The critical need for clarification stemmed from a 2015 Wisconsin Supreme Court case (Bank of New York v. Carson) that stated banks must sell a foreclosed property within a “reasonable amount of time” after the five-week redemption period.

Wisconsin Act 120—Credit Agreements Law Prohibits Enforcement of Promissory Estoppel. Signed on Dec. 16, 2015, this statute creates more certainty in credit transactions and will reduce lender liability claims against financial institutions. Wisconsin joined more than 40 other states that have enacted laws to prevent someone from suing a bank on the grounds that it broke an oral contract. Unlike most other states, however, Wisconsin’s legislation specifically prohibits enforcement of verbal contracts by forgoing in such circumstances the doctrine of promissory estoppel, which allows a claimant to enforce a promise that has not been reduced to a written, signed contract.

Wisconsin Department of Revenue—Sourcing Broker-Dealer Revenue. In late 2014, the WBA became aware that a small but powerful group of taxpayers was seeking to change the state Department of Revenue’s sourcing rules for broker-dealer revenue to the detriment of financial institutions. The WBA immediately recognized this as a concern, since it favored one set of taxpayers over another. It was the only trade association in the state to work on this issue, which ultimately led to a favorable result that satisfied all parties. The new Department of Revenue rules allow taxpayers to choose how they source broker-dealer revenue to the benefit of the taxpayer (cost of performance, market-based, etc.). If the WBA had not intervened, the financial consequence to the affected institutions could have been in the tens of millions of dollars.

Wisconsin Act 300—Fiduciary Access to Digital Assets. Wisconsin’s Uniform Fiduciary Access to Digital Assets Act extends the traditional power of a fiduciary to manage tangible property to include management of a person’s digital assets via default provisions. The new law brings Wisconsin in line with 14 states and provides legal authority to fiduciaries to manage digital property in accordance with a user’s trust, power of attorney or estate plan.

Rose Oswald Poels is president and CEO of the Wisconsin Bankers Association